This Multibagger Small Cap Stock Grew 8.29% In 1 Week, Brokerage Sees Further Upside, Recommends Buy

Hem Securities has given a buy call to Kewal Kiran Clothing Ltd. (CIL) stock for a target price of Rs 294 apiece. Kewal Kiran Clothing is a Textile sector company, engaged in manufacturing, marketing and retailing of branded readymade garments and finished accessories. According to the given target price, the brokerage claims a potential upside of around 10% in 1 year if the stock is purchased at the Current Market Price today. Kewal Kiran Clothing is a small-cap company having a market capitalisation of Rs 3,393.70 crore.

Stock Overview

The stock currently trading at Rs 546.35/share, 0.60% down compared to its previous close of Rs 549.65.share on NSE. Its recorded 52 week low level is Rs 180.20 and the 52 week high level is Rs 1,447.60, respectively.

The stock has performed well over the years, giving good returns. In 1 week, the stock surged 8.29%, whereas, in 1 month, it has given 12.62% positive returns. In the last 3 months, it has given 30.38% positive returns. In a year, it gave 101.89% multibagger returns. In the past 3 years, it gave 187.2% multibagger returns. However, in the past 5 years, the gains declined, given 44.6% positive returns.

 

Result Overview

Kewal Kiran Clothing Q2FY23 consolidated revenues came in at ₹ 226 Cr, up 29.3% YoY and 45.8% QoQ.

PBIDT for Q2FY23 stood at 50 Cr, up 55% YoY and 72% QoQ.

PBIDTM for Q2FY23 came at 22%, 400 bps YoY and 300 bps QoQ.

PAT for Q2FY23 stood at ₹39 Cr, up 44% YoY and up 77% QoQ.

The clothing brand expanded its own retail network and added 38 stores in Q2FY23 (H1FY23: 63 stores added).

Management Commentary

The retail business share, which had declined in FY21 to 39% had recovered to 42% in FY22 and continued to remain stable at 42% for Q2FY23. During pre-Covid period, the share used to be around 42-43%. Looking to enhance revenue growth through equal participation in new age channels of national chain stores and e-commerce while maintaining focus on profitability.

 

Segemental Analysis

Q2FY23- Jeans: (57%), Shirts (23%), Trousers (8%), T-Shirts (4%), Others (8%).

H1FY23- Jeans: (54%), Shirts (21%), Trousers (8%), T-Shirts (5%), Others (12%).

 

Concall Summary

41 stores are currently under development which could be added in H2FY23 in the ratio of 9: 1::FOFO:COCO model stores. From a long term perspective, the management indicated it is aiming to double the EBO count by FY25 with majority of the expansion being on asset light franchise basis.

Planning to enhance its expenditure on marketing and brand promotion to provide higher visibility to its brands across various channels.

 

Other Developments

Focusing on streamlining its supply chain policy and maintaining optimum working capital levels. It has organised trade shows twice a year, which aids in better supply chain planning. Explore new avenues of growth with focus on new range of products viz. topwear, jackets and winter wear segment.

 

Valuation and Outlook

The company is aiming to generate revenue CAGR of over 20% during FY2022-FY2027 led by an ambitious growth plan coupled with consistent margin consistency will help in improving cash flows in the coming years. FY23-24 will be a strong year for the company with healthy order book. "With a strong growth outlook, we initiate a "BUY" rating on the stock and value the stock at 24.9xFY24 EPS to arrive at the target of 600," the broekrage has said.

Disclaimer

The stock has been picked from the brokerage report of Hem Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.