KPR Mill Q3 Results Review - Improving Textiles To See Capex: Systematix

Systematix Report

KPR Mill Ltd.'s revenue fell 13% YoY and 18% QoQ to Rs 12.4 billion, 11% lower than our estimate, as revenue in the Textiles/Sugar & Ethanol division fell 13%/16% YoY and 10%/43% QoQ, respectively.

Gross margin expanded 734 basis points YoY and 817 bps QoQ to 46.8%, boosted by soft raw material prices. Ebitda rose by mere 1% YoY and fell 8.9% QoQ to Rs 2.7 billion, in line with our estimate. Ebitda margin expanded 311 bps YoY and 215 bps QoQ to 21.9% versus our estimate of 19.4%.

Profit after tax increased 7% YoY to Rs 1.9 billion (8% above estimate) on higher other income. KPR currently has an order book of ~Rs 11 billion.

Company has started the garments brownfield expansion which will increase the total capacity to ~177 million pieces. Management is confident that

1. its modernization/capacity expansion plans across segments,

2. strong financial position, and

3. comfortable cash flow, would continue to support robust growth, going forward.

Near term, KPR expects to focus on investments in the textiles division, given the uncertainty and restrictions imposed on the use of sugar syrup/juice for ethanol.

We have cut our FY24E/25E earning per share by 10%/8% to adjust for the soft performance in 9M FY23 and roll forward our valuations to FY26E.

Reiterating 'Buy', with a revised target price of Rs 923 (earlier Rs 753), based on 25 times FY26E earnings.

Key risks arise from lower:

1. garment realisations

2. export demand and

3. sugar production.

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