I’m really surprised at the amount of brickbats this company gets and has been receiving since Q2 results.
I’ve done a quick 5 minute comparison analysis for the last 4 years for Page and Kitex (similar businesses according to me apart from balance sheet/m.cap size which is reflected in their P/E I believe) to try and understand if the criticism for Kitex is fair by any means:-
Page (2011-2015)
Revenue Growth – 3x
Profit Growth – 3.2x
Debt to Equity – Down from .85 to .35
RoE – 50-55% consistently
NPM – 12-14% stable
Current P/E – 78
Kitex (2011-15)
Revenue Growth – 2x
Profit Growth – 4.7x
Debt to Equity – Down from 1.25 to .6
RoE – Increased from 25-27% to 32-34%
NPM – Massive jump from 8% to 20%
Current P/E – 32
Based on the above numbers, IMHO Kitex is absolutely fairly valued (give or take 10-15%). As long as their is earnings growth, the valuations should remain stable unless they can no longer increase margins because of low revenue growth.
But with 20-30% PAT growth numbers, I’m not sure what else people are expecting? I’d take 20-30% earnings growth any day even if revenue is muted if I’ve invested with any degree of MoS.
I agree with the fact that there is little MoS at current valuations and it may require a leap of faith to bet big currently. But I certainly don’t see much reason to start predicting doomsday scenarios. Infact, for all those eager to exit any major positions, I’d be very happy to take some big bites at 600-650
Discl – Invested
PS:
1)For the calculations, please allow for 5-10% error as I have calculated some of it mentally
2) I don’t have much knowledge on accounting, so if you’re one of those who believe it’s books are cooked – most happy to listen to that argument with evidence