KPR Mill rallies 6%, hits record high on robust growth outlook

In the past 11 trading days, KPR Mill's market price has advanced 16 per cent after the company announced the successful commissioning of its new 42 million garments production capacity at Tamil Nadu.

Shares of KPR Mill were up 6 per cent to Rs 562.40, hitting a record high on the BSE in Thursday's intra-day trade, on expectation of strong earnings growth. The stock of the company engaged in textiles and sugar business was trading higher for the fourth straight day, having rallied 11 per cent during the period. It surpassed its previous high of Rs 548.40 hit on November 9, 2021.

In the past 11 trading days, KPR Mill market price has surged 16 per cent after the company announced successful commissioning of its new 42 million garments production capacity at Chengapally, Tirupur district, Tamil Nadu on November 21, 2021. With this, the total Garment manufacturing capacity has increased to 157 million garments per annum, KPR Mill said.

"Strategic plans have always been driving the growth of KPR and we hope that this expansion shall position us to meet the growing market opportunities and strengthen the bright prospects of KPR," the company had said.

For the first half (April-September) of the financial year 2021-22 (H1FY22), KPR Mill posted 137 per cent year on year (YoY) jump in its consolidated net profit at Rs 410 crore on the back of healthy operational performance. Revenue during the period grew 44.5 per cent YoY at Rs 2,166 crore. Earnings before interest, taxes, depreciation, and amortization (ebitda) margin also improved 730 basis point to 29 per cent from 21.7 per cent in H1FY21.

KPR Mill is one of the largest captive power generators in textile industry and 60 per cent of textile power requirement met through wind power. The company has invested in 40 MW co-gen power project. With co-gen power, KPR has attained self sufficiency in meeting its substantial power requirement throughout the year, the company said.

Further, the management indicated that the domestic yarn segment was witnessing strong demand. "Though cotton prices had moved up sharply, yarn prices also moved in tandem. We believe it would be able to pass on the input cost hike and maintain its margins as demand for cotton products continue to stay robust. The company expects to maintain margins in the range of 22-23 per cent in the yarn segment," the management said.

"Q2FY22 margins (~30 per cent) were significantly higher owing to low cost cotton inventory available with the company. The company further indicated it has cotton inventory for one more month. KPR would start buying new cotton soon and is evaluating the market scenario and would stock up cotton in the new cotton season. Normally the company keeps a cotton stock of around four to six months and buys cotton at the start of the season as the quality of the early arrival cotton is quite good," ICICI Securities said in result update.

KPR has two major capex projects in the pipeline worth Rs 750 crore towards garmenting facility (Rs 250 crore) and ethanol facility (Rs 500 crore). The capital deployment towards value accretive projects (targeted RoCE: garmenting: 30 per cent, ethanol: 22 per cent) augurs well for KPR. The robust opportunities in US market give strong visibility for sustained growth in exports (currently Europe is the key market for garment exports), the brokerage firm said and maintained a 'buy' rating on the stock with a target price of Rs 575.