Recommendation - Buy
Hold for 3 years
Target: 70 Rs.
- CMP: 29 Rs
- BSE Code: 530201
- Market Capital: 126.32 Cr.
- Face Value: 02 (With Effect From 03rd February, 2017, the face value of share was reduced to 2/- per share from 10/- per share)
- 52 Week Low / High: 19.4/33.25
- Book Value: 34.55
- Price/Book Value: 0.85
- Promoter Share Pledge – Nil
- TTM EPS – 3.39
- TTM P/E – 8.7
- Industry P/E – 10.01
- Kallam textiles current stock value looks like little bit higher valuation but if you look the company business and results, it seems that company will do better in future.
Part – 1 Company’s Information:
- Kallam Textiles Limited was established in 1994 and located in Andhra Pradesh, India.
- Kallam Textiles Ltd. is one of the largest producers of Spun Yarn for knitting and weaving industries in Andhra Pradesh.
- Kallam Textiles Limited was started with initial capacity of 12,000 spindles and later expanded to 56,400 spindles.
- The company commenced operations with the manufacture of grey, gassed, mercerised and dyed cotton yarn. Today, the company has carved a niche for itself on the textile map of the country
- The core business of the company is manufacturing and sale of cotton and dyed yarn and cotton and dyed fabrics.
- The company offers ring spinning and TFO Yarns.
- Kallam Spinning Mills Limited has three hydroelectric plants with 4.0 MW capacity at Nelakondapally Mandal, Khammam District of Andhra Pradesh. And some used as captive power and rest power is selling to other Company
Part – 2 Company’s Manufacturing Details:
- KSML GINNING DIVISION: The Ginning Division has 28 high production Ginning Machines. The Ginning Division has capacity to press 200 bales /day and 50,000 bales in a year.
- KSML SPINNING DIVISION: The Company today operates 59,280 spindles of Ring Spinning out of which 34,416 compact & 24,864 Non-Compact.
Ring Spinning Yarn : Ne.30s to Ne.80s combed warp / compact.
TFO Yarn : Ne.30/2 to Ne.80/2 combed warp / compact.
Production per Month : Ring Spinning Yarn, 420 tons.
- KSML OPEN END DIVISION : KSML established its Open End unit in the year 2009-10 with an initial capacity of 1248 Rotors. The total Rotors capacity of Open End Unit was increased to 2912.
OE Yarn : Ne10s to Ne20s
TFO Yarn : Ne OE 20s/2
Production Capacity : 16450 kg / day.
4.KSML WEAVING DIVISION : Company plant capacity of production is one Lakh meter per day of woven fabric including 70% yarn dyed shirting and 30% of bottom weight fabric.
5.KSML DYEING DIVISION: The Company has commenced the Commercial Production of Dyeing unit on 23rd September, 2015. The Company had taken up the dyeing of cotton yarn for production with an extent of 5000 kgs per day.
6.KSML HYDEL POWER DIVISION : Company has three hydroelectric plants with 4.0 MW capacity at Nelakondapally Mandal, Khammam District of Andhra Pradesh.
Part – 3 Company’s BCI (Better Cotton Initiative) details:
- Kallam Textiles Limited has been BCI (Known as “Better Cotton Initiative”) certified in December, 2015 for procuring of Better Cotton from the farmers who have been certified by the BCI as a Registered Farmers. The Better Cotton Initiative exists to make global cotton production better for the people who produce it, better for the environment it grows in and better for the sector’s future. BCI aims to transform cotton production worldwide by developing Better Cotton as a sustainable mainstream commodity.
- Advantages of procuring of BCI Cotton :
Yarn produced from BCI Cotton has high market demand when compare to yarn produced from other cotton.
Company trying to be on Higgs international
Company is processing for organic cotton certification
Part – 4 Company’s Products Details
Spun Yarn for knitting and weaving
Part – 5 Company’s - Shareholding Pattern:
Part – 6 Technical Chart:
Part – 7 Peer Comparison:
Part – 8 Company’s – Dividend History:
Part – 9 Financial Focus:
Focus on - Financial Results March 2017:
- The Turnover of the company for the period under review increased to 286.83 Crores as compared to 269.17 Crores registering a growth of 6.56% on annualized basis.
- The profit before tax of the company has been increased by 32.50% on annualized basis from 10.64 Crores to 21.09 Crores in the current financial year.
- The net profit after tax for the year under report was affected and increased to 12.69 Crores from 5.91 Crores.
- SPINNING DIVISION: The Turnover of the Spinning Division for the period 2016-17 has been increased to 222.67 Crores as compared to 207.09 Crores in the previous financial year. The profit before tax of the Division for the period 2016-17 has been increased to 13.75 Crores as compared to 10.99 Crores in the previous financial year.
- WEAVING DIVISION: The Turnover of the Weaving Division for the period 2016-17 has been increased to 180.12 Crores as compared to 156.45 Crores in the previous financial year. The profit before tax of the Division for the period 2016-17 has been increased to 9.26 Crores as compared to 80.16 Lakhs in the previous financial year. Your Company started the Commercial production of weaving unit on 01st September, 2014 with 248 Looms.
- DYEING DIVISION: The Turnover of the Weaving Division for the period 2016-17 has been increased to 10.93 Crores as compared to 12.61 Lakhs in the previous financial year. The profit before tax of the Division for the period 2016-17 has been increased to (23.52) Lakhs as compared to ` (65.65) Lakhs in the previous financial year.
- FOREIGN EXCHANGE EARNING AND OUTGO: Foreign exchange earnings during the year under review amounted to Rs. 44.59 Crores. The Foreign exchange utilized during the year amounted to Rs.60.38 Lakhs.
Focus on - Financial Results December quarter 2017:
- For the quarter ended 31-12-2017, the company has reported a Standalone sales of Rs 86.85 Crore, up 33.07 % from last quarter Sales of Rs 65.26 Crore and up 24.95 % from last year same quarter Sales of Rs 69.50 Crore
- Company has reported net profit after tax of Rs 5.12 Crore in latest quarter.
Part – 10 SWOT Analysis:
- Abundant raw material availability helps control costs and reduces lead-times across operations.
- There is easy availability of low cost and proficient manpower that contributes extensively in the growth of the industry.
- The industry has an added advantage of having numerous segments which help in the provision of ahuge variety of products.
- India is one of the largest exporters of yarn in international market.
- The textile industry of India is one of the highly disintegrated industries.
- Fabric Processing is the weakest link in the Indian textile value chain, adversely affecting its ability to compete in exports.
- There is a huge dependency of the industry on cotton.
- Productivity levels for manufacturing various apparel items are far lower in India in comparison with its competitors.
- More FDI opportunities are available with elimination of quotas and it also contributes immensely in Product Development.
- The trade is growing between regional trade blocs due to bilateral agreements between participating countries.
- The global needs are being catered with product development.
- Information Technology has a crucial role in apparel manufacturing.
- The global needs are being catered with product development
- Competition from China, Vietnam, Cambodia and other countries is increasing
- Striking a balance between the quality and price of products.
- Fluctuating foreign currencies against Rupee could become a threat to the Industry at large.
- Available at low P/E 8 compare to Industry P/E – 10
- High OPM > 12% from last 5 years
- Company making BCI based products which demand has been increased.
- GST impact will be reflected in bottom line in future
- Constant Dividend payout company from last 10 years
- India is first in global jute production and shares 63% of the global textile and garment market. India is second in global textile manufacturing and also second in silk and cotton production. 100% FDI is allowed via automatic route in textile sector.
- Expectations of growth in the apparel segment and higher fibre prices maked bottom line growth
- Under the Make in India branding, the Government of India aims to promote textiles, apparels and handicrafts under various schemes by providing suitable fiscal incentives by giving tax rebates, interest subvention, capital subsidies and promotion of skill development. Launch of Indian Handloom Brand for providing brand value for handloom products. Basic Custom Duty Reduced to 2.5% for textile raw materials used in Technical textiles. This measure will help bring down the input cost for several technical textiles manufacturers in the country.
- The future outlook for the Indian textile and apparel industry is promising. The Government of India has launched a National Textile Policy which aims at creating 35 million new jobs by way of increased investments by foreign companies (expected to be 180-200 billion US$). Textiles exports from India will touch US$ 185 billion by the year 2024-25. Technical textiles are among the most promising and fastest growing areas of Indian textiles industry. The sector is expected to show a CAGR of 16% to reach $ 31 billion by 2020-21.
- The state of Andhra Pradesh has well developed spinning and processing sector in the textile industry and is the one of the leading producers of cotton in the country. Guntur, Chittoor, Kadapa and Kurnool districts of Andhra Pradesh have many textile based industries such as ready-made garments, modern textile weaving, cloth weaving, hosiery and spinning mills.
- Government of Andhra Pradesh (GoAP) aims to promote and develop a robust textile industry that provides sustainable employment to weavers and posits Andhra Pradesh as a destination of choice to global textile majors. The policy aims to modernize textile manufacturing and improve productivity in order to ensure availability of quality fabric at affordable prices to cater to domestic and international demand.
- Stock CMP is 29 Rs. and stock is trading at P/E 8 & TTM EPS 3.39, based on all above investment points, stock may touch 70 Rs. within 3 years’ time horizon.
- Note: The articles are not research reports but assimilation of information available on public domain and it should not be treated as a research report. Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations” Disclosure: It is safe to assume that I might have the discussed companies in my portfolio and hence my point of view can be biased. Readers should consult registered consultants before making any investments.