1. business and industrial

Result Update
November 10, 2014
KPR Mills Ltd.
Previous
Disappointing quarter due to one-time expenses; Maintain BUY
with target price of Rs 352
Rating : BUY
Rating : BUY
Standalone (Rs Mn)
Target : Rs.352
Target : Rs.352
Current
CMP : Rs.310
STOCK INFO
BSE
NSE
Bloomberg
Reuters
Sector
Face Value (Rs)
Equity Capital (Rs mn)
Mkt Cap (Rs mn)
52w H/L (Rs) (Adj.)
3m Avg Daily Volume (BSE + NSE)
532889
KPRMILL
KPR IN
KPRM.BO
Textiles
10
377
11,681
347/105
136,340
SHAREHOLDING PATTERN
Net Sales
EBIDTA
PAT
EPS
Source: BSE
STOCK PERFORMANCE (%) 1m
KPR MILLS
0
SENSEX
6
3m
23
9
12m
109
34
Source: Capitaline, IndiaNivesh Research
KPR MILLS v/s SENSEX
270
220
170
120
70
KPR Mills
Oct/2014
Nov/2014
Sep/2014
Jul/2014
Aug/2014
Jun/2014
Apr/2014
May/2014
Mar/2014
Jan/2014
Feb/2014
Dec/2013
Nov/2013
20
Sensex
Source: Capitaline, IndiaNivesh Research
Daljeet S. Kohli
Head of Research
Mobile: +91 77383 93371, 99205 94087
Tel: +91 22 66188826
daljeet.kohli@indianivesh.in
Prerna Jhunjhunwala
Research Analyst
Mobile: +91 77388 92065
Tel: +91 22 66188848
prerna.jhunjhunwala@indianivesh.in
IndiaNivesh Research
5,780
934
394
10.5
6,684
1,004
347
9.2
13.7
1.3
6.2
6.2
-1.7
-5.7
20.7
20.7
KPR Mills declared Q2FY15 results that were far below our estimates.

Net sales de-grew 1.7% yoy to reach Rs 6573 mn from Rs 6684 mn in Q2FY14
(vs. INSPL est: Rs 7677 mn). This underperformance is on account of 33.9%
de-growth in sugar segment and muted growth of 6.6% in textiles segment.

EBITDA de-grew 5.7% yoy to reach Rs 947 mn in Q2FY15 from 1004 mn in
Q2FY14 (vs INSPL est: Rs 1236). This was on account of lower profitability in
the textiles segment and de-growth in the sugar segment. EBITDA was
positively impacted by lower raw material cost (71.8% of net sales in Q2FY15
vs 73.1% of net sales in Q2FY14) while it was offset by higher other expenses
(6.8% vs 6.3%) and employee cost (7% vs. 5.6%).

Despite de-growth in EBITDA, PAT grew 20.7% yoy to reach Rs 419 mn in
Q2FY15 from Rs 347 mn in Q2FY14 (INSPL est: Rs 499 mn). This growth in PAT
is on account of higher other income and other operating incomes and
reduction in depreciation and interest.
%
75.0
1.2
8.4
15.4
6,573
947
419
11.1
INSPL Variance
Estimate
(%)
7677
-14.4
1236
-23.4
499
-16.2
13.3
-16.2
Source: Company, IndiaNivesh Research
(as on Sep. 2014)
Promoters
FIIs
DIIs
Public & Others
Q2FY15 Q1FY15 Q2 FY14 QoQ (%) YoY (%)
On segmental basis, textile segment reported 6.6% yoy growth to reach Rs 5379
mn in Q2FY15 against Rs 5045 mn in Q2FY14. This is because of reinstating textile
stocks to the extent of Rs 190 mn resulting from decline in cotton prices. Adjusting
for this, EBIT margin would be 16.9% for Q2FY15. EBIT margin of the segment
declined 317 bps yoy to reach Rs 13.4% in Q2FY15 from 16.6% in Q2FY14. Sugar
segment reported 33.9% yoy sales growth to reach Rs 925 mn in Q2FY15 from Rs
1399 mn in Q2FY14. However, the segment turned profitable with Rs 14 mn profit
in Q2FY15 against loss of Rs 88 mn in Q2FY14. Though marginal, sugar segment
EBIT margin of reported 1.5% against loss of 6.3% in Q2FY14.
For H1FY15, KPR Mills Ltd reported 8.1% yoy growth at Rs 12353 mn against Rs
11422 mn in H1FY14. This was driven by 6.9% yoy growth in textile segment and
5.9% yoy growth in sugar segment. EBITDA de-grew 4.3% yoy to reach Rs 1881 mn
in H1FY15 from Rs 1966 mn in H1FY14. EBITDA margin contracted 198 bps yoy to
reach 15.2% in H1FY15 from 17.2% in H1FY14. Muted sales growth coupled with
higher cost due to reinstating of textile stocks led to contraction in margins. However,
PAT grew 29% yoy to reach Rs 813 mn in H1FY15 from Rs 630 mn in H1FY14. This
growth in PAT is on account of higher other income and other operating incomes
and flat depreciation and reduction in interest.
Valuation
At CMP of Rs 310, the stock trades at PE of 6.4x and 4.7x its FY15E and FY16E
earnings estimate of Rs 49.3 and Rs 67.3 per share respectively. We maintain our
estimates on the company. The stock reinstation of textile segment is not likely to
appear again as cotton prices are near to minimum support price level. Sugar
segment is also likely to perform better with the commencement of season from
October. We maintain our BUY rating on the stock with target price of Rs 352.
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Result Update (contd...)
Consolidated financial performance
Rs in mn
Q2FY15
Net sales
6,573
5,780
6,684
13.7
Raw Materials
Staff cost
Other expenditure
Operating Expenses
4,717
462
448
5,627
3,859
437
549
4,845
4,884
376
420
5,680
EBITDA
EBITDA Margin (%)
947
14.4%
934
16.2%
Other Operating Income
Other Income
Depreciation
Profit bef. Int. & Tax
197
56
396
804
156
65
400
755
153
12
399
769
Interest & finance ch.
Profit before tax
235
569
218
537
Total tax expenses
Add/Less: Extraordinary Items
Net profit
151
0
419
PAT
Effective tax rate
Adj. PAT Margins (%)
EPS
Q1FY15 Q2 FY14 QoQ (%)
H1FY15
H1FY14
‐1.7
12,353
11,422
8.1
22.2
5.7
‐18.3
16.1
‐3.4
22.7
6.7
‐0.9
8,576
899
998
10,472
7,859
715
883
9,457
9.1
25.7
13.0
10.7
1,004
1.3
15.0% (177 bps)
-5.7
(62 bps)
1,881
15.2%
1,966
-4.3
17.2% (198 bps)
26.5
‐13.9
‐1.1
6.4
29.0
386.1
‐1.0
4.6
352
121
795
1,559
255
33
795
1,459
38.5
261.7
0.1
6.8
262
507
7.5
6.0
‐10.5
12.3
453
1,106
574
886
‐21.0
24.9
143
0
394
160
0
347
5.5
‐5.8
20.7
256
0
630
14.7
6.2
293
0
813
29.0
419
394
347
6.2
20.7
813
630
29.0
26.4%
6.4%
26.6%
6.8%
31.5%
5.2%
(45 bps) (118 bps)
26.5%
6.6%
28.9%
5.5%
106 bps
11.1
10.5
9.2
21.6
16.7
29.0
6.2
YoY (%)
20.7
Chg (%)
Source: Company, IndiaNivesh Research
Consolidated Segmental Performance
Rs in mn
Revenue (Rs Mn)
Textile
Sugar
Others
Total
EBIT (Rs Mn)
Textile
Sugar
Others
Total
EBIT Margin (%)
Textile
Sugar
Others
Q2FY15
Q1FY15 Q2 FY14 QoQ (%)
YoY (%)
H1FY15
H1FY14
Chg (%)
5379
925
269
6573
4716
856
253
5824
5045
1399
240
6684
14.1
8.1
6.4
12.9
6.6
‐33.9
12.0
-1.7
10095
1781
522
12398
9445
1682
398
11526
6.9
5.9
31.0
7.6
721
14
13
748
630
47
14
690
836
-88
9
757
14.5
‐70.0
‐8.6
8.3
‐13.8
NA
37.6
-1.2
1351
61
27
1438
1478
-61
9
1426
‐8.6
NA
215.3
0.9
13.4
1.5
4.8
13.3
5.5
5.5
16.6
-6.3
3.9
5 bps (317 bps)
LP
LP
(78 bps)
89 bps
13.4
3.4
5.1
15.6 (227 bps)
-3.6
LP
2.1
300 bps
Source: Company, IndiaNivesh Research
IndiaNivesh Research
KPR Mills Ltd.|Result Update
November 10, 2014 | 2
Result Update (contd...)
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007.
Tel: (022) 66188800 / Fax: (022) 66188899
e-mail: research@indianivesh.in | Website: www.indianivesh.in
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