In order to provide backward integration support to the enhanced capacity utilization of home textiles division, the company is undertaking a brown field expansion in yarn segment at Budhani, MP at cost of Rs 1140 cr funded by a mix of debt (Rs 855 cr) and equity (Rs 285 cr). The new yarn plant is scheduled to commission in early 2021. Post expansion the plant will add approx. Rs 1170 cr of revenue to the existing topline of the company. The company reported improvement in its capacity utilization- bed linen reached 46% capacity utilization, bath linen at 56%, yarn at 99% forQ1FY20. Management expects capacity utilization to reach 60 %(+/- 5%) for bath linen and 75%(+/-5%) for bed linen by FY20. We maintain a BUY with a target price of Rs. 67.5.
The company reported improvement in its capacity utilization- bed linen reached 46% capacity utilization, bath linen at 56%,yarn at 99% for Q1FY20. Management expects capacity utilization to reach 60 %(+/5%) for bath linen and 75%(+/-5%) for bed linen by FY20. We retain a BUY with a price target of Rs 83.
The company reported improvement in its capacity utilization- bed linen reached 63% capacity utilization, bath linen at 49%,yarn at 98% for FY19. Management expects capacity utilization to reach 60 %(+/5%) for bath linen and 75%(+/-5%) for bed linen by FY20. We have introduced the estimates for FY21 and retain a BUY with a price target of Rs 83.
The home textiles business outlook is reinforced by the consistently improving utilization in the bath and bed linen segments. We maintain our estimates for FY20/21 and value the stock at 8x FY21E EPS (in line with its one-year forward P/E over the last five years) to arrive at a target price of INR81 (+26% upside). Maintain Buy.