Kewal Kiran Clothing (KEWKIR)

CMP: | 275 Target: | 325 (18%) Target Period: 12 months BUY

December 16, 2021

Turns ex-bonus; stock still offers valuation comfort…

About the stock: KKCL is a branded apparel player with a strong bouquet of brands
(owned brands ‘Killer’, ‘Lawman Pg 3’, ‘Integriti’ and ‘Easies‘) across various price
points. The company’s product portfolio is primarily focused on men’s casual wear

Event Update
while KKCL has also entered women’s and kids wear segment. On the financial front,
it has exhibited consistent double digit margins with a healthy balance sheet and Particulars
strong return ratios though revenue growth has been constrained owing to the Particular Amount
company’s policy of not resorting to excessive discounting like many of its peers. Market Capitalisation (| Crore) 1,695.2
 KKCL has exhibited a strong margin profile over the last decade with Debt (FY21) (| Crore) 46.4
average margin in excess of 20%, which is better than most of its peers in Cash & Investments (FY21) 298.5
the branded apparel space EV (| Crore) 1,443.2
52 week H/L 299/ 153
Event: Bonus issue Equity Capital (| Crore) 61.6
 The Board recommended the issue of bonus shares in proportion of four Face Value (|) 10
bonus share (face value of | 10 each) for every equity share held. The record
date for the same is December 17, 2021 while ex-date for the same is today, Shareholding pattern
December 16, 2021 S ep-20 Dec-20 M ar-21 Jun-21 S ep-21
Promoter 74.3 74.3 74.3 74.3 74.3
 Hence, KKCL’s share price has dropped to | 275/ share from | 1375/share FII 9.5 9.5 9.4 9.5 9.5
DII 11.8 11.8 11.8 11.8 9.8
What should investors do? KKCL’s stock price has underperformed broader
Others 4.4 4.4 4.5 4.4 6.4
indices over the last five years, mainly on account of subdued revenue growth.
However, we believe the company is well placed to benefit from a demand revival Price Chart

ICICI Securities – Retail Equity Research

owing to strong brand portfolio and pan-India store and distribution network. It 300 30000
aspires to achieve double digit topline growth through accelerated store addition and 250 25000
increasing share of online space. 200 20000
150 15000
 KKCL is trading at reasonable valuations of 18x, 15x EPS of FY23, FY24E,
100 10000
respectively. Also, balance sheet comfort warrants we maintain our BUY 50 5000
rating on the stock 0 0
Dec-18

Dec-19

Dec-20

Dec-21
Aug-19

Aug-20

Aug-21
Apr-19

Apr-20

Apr-21
Target Price and Valuation: We value KKCL at | 325 i.e. 18x FY24E earnings

Key triggers for future price performance: KKCL BSE 500

 KKCL is well placed to benefit from robust demand owing to its diversified
Key risks
product portfolio and established distribution network. Many regional
brands and unorganised apparel players are financially stressed owing to (i) Slower ramp up of store network (ii)
impact of pandemic, which is beneficial for organised players like KKCL Inability to pass on input cost hike may
subdue profit margins
 The company has a virtually debt free status (D/E: 0.1x) with cash &
investments worth | 298 crore Research Analyst
 We model revenue, earnings CAGR of 32%, 79%, respectively, in FY21-24E Bharat Chhoda
[email protected]
Alternate Stock Idea: Apart from KKCL, we like Siyaram Silk Mills.
Cheragh Sidhwa
 Siyaram’s strong brand portfolio and presence in tier II/tier III towns would [email protected]
enable it to benefit from a shift from unorganised to organised players
 We have a BUY rating on the stock with a target price of | 590

Key Financial Summary: EPS adjusted as per bonus issue

5 year CAGR FY22E FY23E FY24E 3 year CAGR
Financials FY19 FY20 FY21
(FY16-21) (FY21-24E)
Net Sales 502.4 529.7 302.7 -7.8% 542.5 613.6 694.1 31.9%
EBITDA 112.3 95.1 18.7 -24.9% 84.8 119.4 140.0 95.7%
Adjusted PAT 80.3 73.0 19.4 -14.3% 66.7 94.3 110.8 78.7%
P/E (x) 21.1 23.2 87.3 25.4 18.0 15.3
EV/EBITDA (x) 13.3 15.8 77.3 17.8 12.5 10.5
RoCE (%) 19.9 16.3 2.5 14.8 20.0 21.1
RoE (%) 18.7 16.4 4.5 14.9 19.3 20.2
Source: Company, ICICI Direct Research
 Event Update | Kewal Kiran Clothing ICICI Direct Research

Financial Summary

Exhibit 1: Profit and loss statement | crore Exhibit 2: Cash flow statement | crore
(Year-end March) FY21 FY22E FY23E FY24E (Year-end March) FY21 FY22E FY23E FY24E
Total operating Income 302.7 542.5 613.6 694.1 Profit After Tax 19.4 66.7 94.3 110.8
Growth (%) -42.9 79.2 13.1 13.1 Add: Depreciation 6.7 8.9 9.5 10.1
Raw Material Expenses 180.0 300.3 315.7 356.9 (Inc)/dec in Current Assets 74.7 -101.9 -26.8 -42.0
Gross margins 40.5 44.6 48.6 48.6 Inc/(dec) in CL and Provisions 4.4 12.4 4.2 9.1
Employee Expenses 52.6 59.7 67.5 74.3 Others 0.0 0.0 0.0 0.0
Admin Expenses 32.8 43.4 49.1 54.1 CF from operating activities 105.2 -13.9 81.2 88.0
Selling Expenses 18.6 54.2 62.0 68.7 (Inc)/dec in Investments 66.0 -1.3 -1.3 -1.3
Total Operating Expenditure 284.0 457.6 494.3 554.0 (Inc)/dec in Fixed Assets -6.4 -11.2 -11.0 -11.8
EBITDA 18.7 84.8 119.4 140.0 (Inc)/dec in CWIP 1.9 0.0 0.0 0.0
Growth (%) -80.4 354.4 40.7 17.3 Others -0.8 6.8 0.0 0.0
Depreciation 6.7 8.9 9.5 10.1 CF from investing activities 60.6 -5.8 -12.4 -13.2
Interest 6.8 5.9 5.5 6.2 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0
Other Income 17.0 19.0 21.5 24.3 Inc/(dec) in loan funds -41.6 18.7 -3.7 8.0
PBT 22.2 89.0 125.8 148.0 Others -36.8 -52.4 -52.4 -52.4
Others 0.0 0.0 0.0 0.0 CF from financing activities -78.4 -33.7 -56.1 -44.4
Total Tax 2.8 22.4 31.6 37.1 Net Cash flow 87.4 -53.4 12.7 30.5
PAT 19.4 66.7 94.3 110.8 Opening Cash 80.2 167.6 114.2 126.9
Growth (%) -73.4 243.5 41.3 17.6 Closing Cash 167.6 114.2 126.9 157.4
EPS (|) 3.2 10.8 15.3 18.0 Source: Company, ICICI Direct Research
Source: Company, ICICI Direct Research

Exhibit 3: Balance Sheet | crore Exhibit 4: Key ratios

(Year-end March) FY21 FY22E FY23E FY24E (Year-end March) FY21 FY22E FY23E FY24E
Liabilities Per share data (|)
Equity Capital 12.3 61.6 61.6 61.6 EPS 3.2 10.8 15.3 18.0
Reserve and Surplus 420.6 385.6 427.5 486.0 Cash EPS 4.2 12.3 16.8 19.6
Total Shareholders funds 433.0 447.3 489.2 547.6 BV 70.2 72.6 79.3 88.8
Total Debt 46.4 65.1 61.4 69.4 Cash Per Share 27.2 18.5 20.6 25.5
Deferred Tax Liability 2.9 2.8 2.7 2.6 DPS 6.0 8.5 8.5 8.5
Other long term liabilities 3.1 3.2 3.2 3.3 Operating Ratios
Total Liabilities 485.4 518.4 556.5 623.0 EBITDA Margin (%) 6.2 15.6 19.5 20.2
Assets PBT Margin (%) 7.3 16.4 20.5 21.3
Gross Block 160.1 171.3 182.3 194.1 PAT Margin (%) 6.4 12.3 15.4 16.0
Less: Acc Depreciation 77.8 86.7 96.2 106.3 Inventory days 95.0 72.0 65.0 65.0
Net Block 82.3 84.6 86.1 87.8 Debtor days 180.0 125.0 125.0 125.0
Capital WIP 1.0 1.0 1.0 1.0 Creditor days 68.0 69.0 69.0 69.0
Total Fixed Assets 83.3 85.6 87.1 88.8 Return Ratios (%)
Investments 130.9 132.2 133.5 134.9 RoE 4.5 14.9 19.3 20.2
Inventory 50.6 107.0 109.3 123.6 RoCE 2.5 14.8 20.0 21.1
Debtors 131.0 185.8 210.1 237.7 Valuation Ratios (x )
Loans and Advances - - - - P/E 87.3 25.4 18.0 15.3
Other Current Assets 11.3 2.0 2.1 2.3 EV / EBITDA 77.3 17.8 12.5 10.5
Cash 167.6 114.2 126.9 157.4 EV / Net Sales 4.8 2.8 2.4 2.1
Total Current Assets 360.5 409.0 448.4 520.9 Market Cap / Sales 5.6 3.1 2.8 2.4
Creditors 45.7 56.8 59.7 67.5 Price to Book Value 3.9 3.8 3.5 3.1
Other current liabililites 27.9 28.4 29.0 29.6 Solvency Ratios
Provisions 23.4 24.1 24.8 25.6 Debt/EBITDA 5.4 1.5 1.0 1.0
Total Current Liabilities 97.0 109.3 113.5 122.7 Debt / Equity 0.1 0.1 0.1 0.1
Net Current Assets 263.5 299.7 334.9 398.3 Current Ratio 4.9 4.8 5.1 5.4
Others Non-current Assets 7.7 0.9 1.0 1.0 Quick Ratio 4.2 3.5 3.8 4.1
Application of Funds 485.4 518.4 556.5 623.0 Source: Company, ICICI Direct Research
Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 2

 Event Update | Kewal Kiran Clothing ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavors to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock

Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]

ICICI Securities | Retail Research 3

 Event Update | Kewal Kiran Clothing ICICI Direct Research

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