Kitex Garments reported a 10.64% increase in net profit to Rs. 159.75 million for Q1 FY16 compared to Q1 FY15. Revenue rose 6.15% to Rs. 1090.81 million. EPS increased 10.64% to Rs. 3.36. The company is recommended as a buy with a target price of Rs. 895 based on expected sales and profit growth over the next two years. The global children's wear market is large and growing, representing an opportunity for Kitex Garments as a leading children's apparel producer.

1. CMP 810.95
Target Price 895.00
ISIN: INE602G01020
JULY 23rd
2015
KITEX GARMENTS LTD
Result Update (PARENT BASIS): Q1 FY16
BUY
Index Details
Stock Data
Sector Other Apparels & Accessories
BSE Code 521248
Face Value 1.00
52wk. High / Low (Rs.) 1070.00/244.00
Volume (2wk. Avg.) 52000
Market Cap (Rs. in mn.) 38520.13
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 5110.96 5826.49 6583.94
EBITDA 1821.60 2142.54 2402.03
Net Profit 985.17 1139.29 1288.71
EPS 20.74 23.99 27.13
P/E 39.10 33.81 29.89
Shareholding Pattern (%)
1 Year Comparative Graph
KITEX GARMENTS LTD S&P BSE SENSEX
SYNOPSIS
Kitex Garments Limited engages in the manufacture,
export, and sale of garments in India and
internationally.
During Q1 FY16, the company’s net profit jumps to
Rs. 159.75 mn against Rs. 144.39 mn in Q1 FY15, an
increase of 10.64%.
Revenue for the quarter rose by 6.15% to Rs.
1090.81 mn from Rs. 1027.62 mn, when compared
with the prior year period.
During the quarter, EBIDTA is Rs. 360.48 mn as
against Rs. 296.39 mn in the corresponding period of
the previous year, grew by 21.62%.
During Q1 FY16, Profit before tax (PBT) grew by
22.72% to Rs. 258.17 mn from Rs. 210.38 mn in Q1
FY15.
EPS of the company stood at Rs. 3.36 a share during
the quarter, registering 10.64% increase over
previous year period.
ICRA has upgraded the Company's long term rating
from ICRA A plus to ICRA AA minus and that of short
term rating from ICRA A one to ICRA A one Plus.
Kitex Garments Ltd has been selected in the top 200
Asia Pacific Corporations in Forbes Asia’s ‘Best
Under A Billion List’.
Net Sales and PAT of the company are expected to
grow at a CAGR of 20% and 45% over 2014 to 2017E
respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Kitex Garments Ltd 810.95 38520.13 20.74 39.10 14.60 125.00
Sarla Performance Fibers Ltd 594.90 4967.60 35.54 16.74 3.22 75.00
Arvind Ltd 309.60 79952.10 14.62 21.18 3.10 23.50
Zodiac Clothing Company Ltd 321.00 6263.10 4.87 65.91 3.37 31.00

2. QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results Updates- Q1 FY16,
Months June-15 June-14 % Change
Net Sales 1090.81 1027.62 6.15
PAT 159.75 144.39 10.64
EPS 3.36 3.04 10.64
EBITDA 360.48 296.39 21.62
The company’s net profit jumps to Rs. 159.75 million against Rs. 144.39 million in the corresponding quarter
ending of previous year, an increase of 10.64%. Revenue for the quarter rose by 6.15% to Rs. 1090.81 million
from Rs. 1027.62 million, when compared with the prior year period. Reported earnings per share of the
company stood at Rs. 3.36 a share during the quarter, registering 10.64% increase over previous year period.
Profit before interest, depreciation and tax is Rs. 360.48 million as against Rs. 296.39 million in the
corresponding period of the previous year.
Break up of Expenditure
Break up of
Expenditure
Rs. in Mn
Q1 FY16 Q1 FY15
%
Change
Cost of Material
Consumed
495.90 493.96 0%
Employee Benefit
Expenses
186.76 149.78 25%
Depreciation &
Amortization Expense
54.58 50.44 8%
Other Expenses 145.53 120.92 20%

3. Segment Revenue
Latest Updates
• ICRA has upgraded the Company's long term rating from ICRA A plus to ICRA AA minus and that of short
term rating from ICRA A one to ICRA A one Plus with a comment that the outlook on the long term rating is
stable.
• Kitex Garments Ltd has been selected in the 11 Companies which has appeared in the top 200 Asia Pacific
Corporations in Forbes Asia’s ‘Best Under A Billion List’ which was released in Singapore.
COMPANY PROFILE
Kitex Garments Limited is based in Kochi, India. Kitex Garments Ltd. was incorporated in 1992. It made its public
issue in the year 1995. 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. It is promoted by Boby M Jacob, Kitex Exports Ltd,
Sabu M Jacob and Somy Varghese. Kitex Garments Limited is in the business of manufacturing and exporting
garments. The Company manufactures different types of garments, such as hosiers, shirts, pants, jackets,
innerwear and outerwear. 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.

4. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31, 2014 -2017E
FY14A FY15A FY16E FY17E
SOURCES OF FUNDS
Shareholder's Funds
Share Capital 47.50 47.50 47.50 47.50
Reserves and Surplus 1694.19 2591.25 3057.68 3577.48
1. Sub Total - Net worth 1741.69 2638.75 3105.18 3624.98
Non Current Liabilities
Long term Borrowings 289.14 268.37 246.90 232.09
Deferred Tax Liabilities 216.06 225.86 237.15 246.64
Long term Provisions 23.32 32.83 37.75 42.66
2. Sub Total - Non Current Liabilities 528.52 527.06 521.81 521.39
Current Liabilities
Short term Borrowings 905.12 1139.13 1287.22 1403.07
Trade Payables 244.17 197.24 224.85 245.09
Other Current Liabilities 304.59 351.02 393.14 424.59
Short Term Provisions 313.37 499.65 579.59 660.74
3. Sub Total - Current Liabilities 1767.25 2187.04 2484.81 2733.49
Total Liabilities (1+2+3) 4037.46 5352.85 6111.79 6879.86
APPLICATION OF FUNDS
Non-Current Assets
Fixed Assets
i. Tangible Assets 1809.11 1878.69 1972.62 2076.96
ii. Intangible Assets 2.95 3.58 4.12 4.61
iii. Capital work-in-progress 6.66 2.92 3.21 3.47
a) Sub Total Fixed Assets 1818.72 1885.19 1979.95 2085.04
b) Non-current investments 0.04 0.04 0.06 0.07
c) Long Term loans and advances 28.01 35.68 43.53 50.49
d) Other non-current assets 17.33 20.02 22.62 25.34
1. Sub Total - Non Current Assets 1864.10 1940.93 2046.17 2160.95
Current Assets
Inventories 108.00 112.03 117.63 123.51
Trade receivables 530.64 626.60 720.59 814.27
Cash and Bank Balances 1036.09 2032.58 2452.58 2869.52
Short-terms loans & advances 342.10 462.01 572.89 687.47
Other current assets 156.53 178.70 201.93 224.14
2. Sub Total - Current Assets 2173.36 3411.92 4065.62 4718.91
Total Assets (1+2) 4037.46 5352.85 6111.79 6879.86

5. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 15m 12m 12m 12m
Net Sales 4422.10 5110.96 5826.49 6583.94
Other Income 133.44 134.23 155.71 163.49
Total Income 4555.54 5245.19 5982.20 6747.43
Expenditure -3470.72 -3423.59 -3839.66 -4345.40
Operating Profit 1084.82 1821.60 2142.54 2402.03
Interest -106.16 -191.64 -210.80 -227.67
Gross profit 978.66 1629.96 1931.74 2174.36
Depreciation -96.80 -213.29 -238.88 -265.16
Profit Before Tax 881.86 1416.67 1692.85 1909.20
Tax -308.17 -431.50 -553.56 -620.49
Net Profit 573.69 985.17 1139.29 1288.71
Equity capital 47.50 47.50 47.50 47.50
Reserves 1694.19 2591.25 3057.68 3577.48
Face value 1.00 1.00 1.00 1.00
EPS 12.08 20.74 23.99 27.13
Quarterly Profit & Loss Statement for the period of 31st Dec, 2014 to 30th Sep, 2015E
Value(Rs.in.mn) 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15E
Description 3m 3m 3m 3m
Net sales 1220.98 1580.34 1090.81 1287.16
Other income 50.97 6.30 58.98 47.18
Total Income 1271.95 1586.64 1149.79 1334.34
Expenditure -801.79 -920.73 -789.31 -868.83
Operating profit 470.16 665.91 360.48 465.51
Interest -65.51 -49.46 -47.73 -50.59
Gross profit 404.65 616.45 312.75 414.92
Depreciation -52.80 -58.29 -54.58 -56.76
Profit Before Tax 351.85 558.16 258.17 358.15
Tax -120.54 -141.88 -98.42 -118.73
Net Profit 231.31 416.28 159.75 239.43
Equity capital 47.50 47.50 47.50 47.50
Face value 1.00 1.00 1.00 1.00
EPS 4.87 8.76 3.36 5.04

6. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 12.08 20.74 23.99 27.13
EBITDA Margin (%) 24.53 35.64 36.77 36.48
PBT Margin (%) 19.94 27.72 29.05 29.00
PAT Margin (%) 12.97 19.28 19.55 19.57
P/E Ratio (x) 67.14 39.10 33.81 29.89
ROE (%) 32.94 37.33 36.69 35.55
ROCE (%) 40.25 50.29 51.33 50.71
Debt Equity Ratio 0.69 0.53 0.49 0.45
EV/EBITDA (x) 35.65 20.80 17.55 15.52
Book Value (Rs.) 36.67 55.55 65.37 76.32
P/BV 22.12 14.60 12.41 10.63
Charts

7. OUTLOOK AND CONCLUSION
At the current market price of Rs.810.95, the stock P/E ratio is at 33.81 x FY16E and 29.89 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.23.99 and
Rs.27.13 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 20% and 45% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 17.55 x for FY16E and 15.52 x for FY17E.
Price to Book Value of the stock is expected to be at 12.41 x and 10.63 x for FY16E and FY17E respectively.
We expect that the company surplus scenario is likely to continue for the next two to three years, will keep its
growth story in the coming quarters also. Hence, we recommend ‘BUY’ for ‘Kitex Garments Ltd’ with a target
price of Rs. 895.00 for medium to long term investment.

8. INDUSTRY OVERVIEW
Indian Textile & Apparel Sector
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. The textile industry accounts for 21 percent of the total employment generated in the
economy.
Indian Apparel Exports
Though most of the industry segments are witnessing a contraction in exports, according to US department of
commerce’s Office of Textiles and Apparel (OTEXA) data between January and October 2014, 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 April-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.
Overview of Infantwear
Children’s wear market in which Infantwear 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.
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in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.

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