1 KKCL share price target reports by brokerages below. See what is analyst's view on KKCL share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
EBITDA margins for YTDFY20 have dipped to 18.3% (vs. average run rate of 20%+). In a bid to sustain double digit topline growth, the management has alluded at a possibility of dilution in margin profile to a range of 18-19%. Despite the same, KKCL remains one of the most profitable branded apparel players having a robust balance sheet with cash & investments worth ~Rs 270 crore. The management expects working capital days to remain elevated (at similar levels of FY19). However, with the company having robust cash & investments, it does not foresee a further increase in working capital debt. The debt/equity ratio is comfortably placed at 0.2x. Factoring in the YTDFY20 performance, we revise our estimates downwards. We reiterate BUY rating on the stock with a revised target price of | 1160 (16.0x FY21E EPS).
Valuation: We have broadly maintained our earnings estimates for FY2020/21 to factor in lower than earlier expected operating margins which will be set-off by a lower corporate tax rate of 25.2%, keeping PAT estimates largely unchanged. We expect KKCL’s volume growth to recover gradually, propelled by a turnaround in performance of core brands and higher investments on promotional activities (especially in H2FY2020 supported by the festive season). The stock is currently trading at 7.3x its FY2021E EV/ EBIDTA, at a discount to its historical trading multiple. We maintain our Hold rating with an unchanged PT of Rs. 1,155.
We are positive on the company for its better return ratios. However, mounting working capital and lower-than-industry revenue growth are concerns. We maintain our Buy on the stock, with a target of 1,587 (earlier 1,706), at 15x FY21e EV/ EBITDA. Risk: Keener competition trimming volume and realisation growth.
The management is undertaking several initiatives to accelerate revenue growth while maintaining its current margin profile. We model revenue CAGR of 10% over FY19-21E, with EBITDA margins expected to remain range bound at 22%. The stock price has corrected sharply by ~20% since our last result update, making it available at valuations of 13.8x FY21E earnings. We have a BUY recommendation on the stock with a revised target price of Rs 1235 (16.0x FY21E EPS).
Consistent volume growth to be key trigger for revenue growth, margins expected to be maintained at above 20%: KKCL’s double digit revenue growth in Q4FY2019 was driven by a strong volume performance. Realizations remained flat, unlike the dips seen in the past few quarters, as the company has increased its advertisement and promotion spends. Demand has been steady for the company and the overall demand environment for apparel players is on a positive trajectory. KKCL does not want to compromise on margins and has maintained the target of achieving OPM at above 20%. KKCL has decided to adopt the strategy of offering products on a 20% SOR basis to help them increase their penetration in Northern India. The volatility seen in volumes in the past few quarters seem to settle in and thus, steady volume growth in the coming quarters would be the key trigger for revenue growth. Page 3 Lawman, which de- grew since the past few quarters, is expected to turn positive from the coming quarter and would help drive revenue growth. The new brands Immortal (targeting lower price point products) and Desi Belle (acquired in Q2FY2019) are at a very nascent stage but have been performing as per management’s expectations. However, the management is confident that the contribution from Desi Belle would substantially improve from the second quarter of FY2020.
After two subsequent years of subdued topline growth, FY19 witnessed decent recovery, with revenue growth of 9.2% YoY. The management is undertaking several initiatives to accelerate revenue growth with a long term view of doubling revenues to | 1000 crore over next five years. KKCL has been one of the most profitable brands generating EBITDA margins (21%+) and having a strong balance sheet with debt/equity ratio comfortably placed at 0.2x. We model revenue CAGR of 12% over FY19-21E, with EBITDA margins expected to remain range bound at 22%. The dual strategy to revive revenue growth while maintaining balance sheet health augurs well over the long term. Hence, we upgrade our recommendation to BUY with a revised target price of | 1500 (18.0x FY20E EPS).
Gradual revival in performance foreseen; retained Hold: KKCL is getting out of a conservative mode and is focusing on regaining its footing in the denim/casual wear space. Though the levers are in place, we expect the revival to take some time. Hence, revenue growth is expected to remain in the range of 8-10% in the coming years. However the OPM will continue to remain at 20%+ as the company will focus on promotional offerings to consumers rather than spending more on brand building and media activities. The working capital days are expected remain stable and hence, we expect balance sheet to remain de-leveraged (except for any significant acquisition). We maintain our Hold recommendation on the stock with an unchanged Price Target of Rs. 1,415 and would advise investors with long term view to stay invested in the company, given its lean balance sheet and decent margin profile in the apparel space.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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