KPR Mills Ltd Q1FY16 Result/Concall Update By IndiaNivesh

At CMP of Rs 686, the stock trades at PE of 10.9x and 7.8x its FY16E and FY17E earnings of Rs 63.2 and Rs 88 per share respectively. We are positive on the strong business model of the company due to its vertically integrated capacities, focus on value added products, captive green power capacity and leadership position in knitwear segment of the industry. Its proximity to clients in Tirupur provides location advantages. Reducing debt and expected improvement in margin is likely to improve its ROE to 26.4% in FY17E from 19.7% in FY15. We maintain BUY rating on the stock with revised SOTP based target price of Rs 822. We have revised EV/EBITDA multiple of textile segment to 6.2x from 5.7x earlier due to expected improvement in margins and its better financial performance than peers like Vardhaman Textiles, Arvind and Raymond. The key risk to our estimates would be steep volatility in cotton prices.

KPR-Mills-Q1FY16-Update