Broking firm Sharekhan has a "buy" call on the stock of S.P. Apparel and sees a 28% upside on the stock from the current levels. The shares of S.P. Apparels closed the day at Rs 310 on Friday.
Turnover to cross Rs 1,000 crores
S.P. Apparel revenues are expected to cross Rs. 1,000 crore mark by FY2023 with consolidated OPM close to 18%, according to brokerage firm Sharekhan.
The company is adding 3,600 spindles to take its total capacity to 27,000 spindles. S.P. Apparel expects garment margins to be 18-20% and export volume to by 57-58 million in FY2022 aided by capacity expansion and addition of new verticals.
"The UK division is witnessing good recovery with current order book of 7.1 million pounds and expects to add three new customers in the coming months. The company expects the revenue from this division to double in the next 2-3 years and the division's EBITDA margin to sustain at 5-5.5%. The company formed a wholly owned (100%) subsidiary named ‘S.P Retail Ventures Pvt. Ltd.' to carry out retail business," Sharekhan has stated in its report.
Attractive on valuations
"The stock is attractively valued at 7.2 times its FY2023E EPS and 5.9 times its FY2024E EPS, which is at discount to its historical average of 12 times (and 4.5 times its FY2023E EV/EBIDTA). Improving growth prospects in the garment business and strengthening of balance sheet with reduction in debt will aid re-rating and focus on scaling up the core garment business would act as an additional trigger. We stay Positive on the stock," Sharekhan has said in its report.
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