Kpr mill update(credit rating 2023, concall and investor presentation)
1…KEY STRENGTHS
A…Vertically integrated textile mill
KPR is one of the largest vertically integrated companies with presence across the textile chain value from manufacturing of cotton
yarn to processed fabric to garments which imparts strong operational flexibility.
=The product range comprises readymade knitted
apparel, fabrics, compact, melange, carded, polyester and combed yarn.
= Under the garment division, the company manufactures
knitted garments for men, ladies and children wear, which includes casual wear t-shirts, nightwear,
B…Poximity to ‘Tirupur’-
Asia’s largest Knitwear
premium Cluste
C…Best quality cotton
‘Shankar 6’ used for
consistent quality
D…Integrated Sugar, Co-gen and Ethanol production capacity
2…Based on the discussion with the management, CARE Ratings expects garment segment’s contribution is expected to gradually increase to 50% from the current 39%.
3…Low vulnerability of operating margin to volatility in cotton prices
=The profitability of spinning mills depends largely on the prices of cotton and cotton yarn which are governed by various factors such as area under cultivation, monsoon, international demand-supply situation, etc.
=The cotton being the major raw material of spinning mills, movement in cotton prices without parallel movement in yarn prices impact the profitability of the spinning mills.
=The cotton textile industry is inherently prone to the volatility in cotton and yarn prices.
=However, though there is wide fluctuation in cotton prices over the years nevertheless,
A…Prudent and pragmatic cotton procurement strategies and availability of exclusive personnel in the cotton growing areas, has enabled KPR access to quality cotton at a competitive price, thereby protecting its margins.
B…KPR is an integrated Apparel Unit, the impact of higher cost of raw material on its performance is minimal as the additional cost is shouldered by the resultant products.
4…Capex
=Invested in growth initiatives such as vortex spinning mill, processing and printing expansion, rooftop solar plant, and ethanol capacity expansion.
= We will wait for market conditions to improve and will plan further capex.
=Assessing future capex based on availability of sugarcane and molasses for ethanol production.
Disc…invested from lower level
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