Kitex Garments, a part of the
Anna – Kitex group of companies with easy access to sea and airports. The
company was established in 1992 and today it has become to be one of the
largest exporters of infants garments in India. Not only that, Kitex has also
become world’s 3rd largest manufacturer of infant wear. The company
has a strong international presence especially in US and Europe.
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| Source: Company |
The company’s product line
includes body suits, sleepwear, rompers, burps, bibs, training pants. The
company is also one of the largest employer in the private sector employing
over 7000 people. The current manufacturing facility produces 250,000 units of
garments per day.
India has a share of 25 per cent
in the global spinning capacity. India produces 20 per cent of global cotton
supply both for domestic use and for export. The country ranks No.2 in global
textile and apparel exports with nine per cent growth since 1995. About 27 per
cent of the foreign exchange earnings are on account of export of textiles and
clothing alone. Indian textile and apparel exports to the US rose nearly 6.5
per cent. As per the DGCSI – India statistics the garments segment witnessed a
growth of 16% during Apri-December (FY15) as against the same period in (FY14).
The overall textile and garment exports, is expected to reach $41 billion in
2014-15, compared with $39.3 billion in the previous year. Children’s wear
market in which infant wear is a segment, is one of the most profitable
segments in the global apparel industry and is estimated to hit a value of
173.6 billion dollars by 2017. In developed economies, although birth rates are
generally in a downtrend, parents are spending more on their children, offering
a wealth of opportunities for babies’ and children’s products. The industry
also has great potential in the BRIC countries, given the sheer size of the
population of babies and children and the burgeoning middle class. At this
point, Europe and the U.S are the major consumers of the global children wear
market.
The company has posted
extra-ordinary superb returns in the past fiscal. In the FY15, the PAT margin
has increased by more than 600 bps to reach 19% margin. The revenue has
increased by more than Rs 700 cr to touch revenue of Rs 5,247 cr in FY15. From
Rs 1,109 cr, the operating profit increased at an extra ordinary pace to touch
Rs 1,841 cr. The company has delivered great returns to the shareholder by
posting an increasing trend in the ROE’s. The company has posted an ROE of 27%,
39%, 45% for FY13, FY14, FY15 respectively.
The company has good prospects in
the future as the global economy is expected to improve. The developed
economies are stable and as the financial stability improves, the consumers
will spend for their infants well care. The company also has plans to start
operations in US to establish a strong market. In future, the firm also plans
to start manufacturing under their own brand name. The stock may look expensive
but one should consider buying the stock on dips. We suggest a buy with a target price of Rs 1500 in the next nine
months.
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| Source: Bloomberg Kitex vs NIFTY |
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