KITEX GARMENTS
A part of the renowned Anna-Kitex group of companies, founded by the legendary Late Shri M. C. Jacob, Kitex Garments Ltd is the largest employer in private sector in the state of Kerala. It is located near Kochi and has easy access to sea and air ports. The company was established in 1992. With unmatched global connections, this company caters to prominent and renowned conglomerates in USA and Europe. The company currently employs over 7000 people at its facility, and has been a business provider to many satellite businesses in the state. Having started with INR 1.8 Crores turnover in the year 1995-96, the company has now grown to a turnover of over INR 524 Crores in 2014-15. The company is currently the second largest producer of children's apparel in the world, and is now in the process of setting up operations in the United States of America.
CURRENT MARKET PRICE - Rs. 720
52 WEEK HIGH - Rs. 1074
52 WEEK LOW - Rs. 285
BOOK VALUE -58.92
EPS - 21.06
PREVIOUS QUARTER RESULTS
INVESTMENT RATIONALE
1. Kitex is the 2nd largest children's apparel manufacturer in the world. Its also Indi'a largest exporter of Infant wear.
2. Kitex is one of the Indian companies mentioned in the Forbes best of Asia under a Billion 2015 companies list.
3. It has a strong presence in a highly specialised market of infant wear. The US market accounts for nearly 50% of the 20 billion $ market of infant wear, Kitex has a presence here for the last two decades. This gives the company a huge advantage over other competitors coupled with excellent contacts and deep market knowledge.
4. After 2 decades of supplying to leading retailers like Mothercare, Walmart, JC Penny, Babies-R-us etc, it has finally decided to launch its own private label in the US by spring 2016. In the near future, this could be a huge trigger for growth.The company is aiming for 50million dollars in sales in about 5 years time , just from its private label. In the very first year, the target is about 5 million $.
5. Profit has consistently grown at 40% over the last 5 years.
6. It trades at a Price- equity valuation of about 37, whereas the Industry P/E is 46. This indicates a further room for growth in price.
7. Capacity expansion is also underway, the company aims to double its production capacity from 5.5lakh pieces a day to 1.1million pieces a day in 2015-16.
8. Cotton prices are presently on a low, this may prove to be another short term trigger for the stock price , through improved margins/profitability.
9. Kitex operates in a virtually recession proof industry , as parents generally never compromise on the quality of the garments for their infant.
10. Company has been a regular dividend paying company. Which is an indicator, that profits and growth are real. Not only on paper and that the management is thoughtful about its shareholders.
EXPECTED TARGETS
This is an investment grade stock. Please do not look at its price everyday. Keep patiently buying on dips. Levels below 800 are good to enter. Kitex can be a wealth generator.
Keep a horizon of 2-3 years. I believe targets of 1100-1250-1400-1600 should come within this time frame, if the company grows at the rate it has suggested (20-25% CGPA).
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