Sharekhan
Kewal Kiran Clothing (Hold)
CMP: ₹1,280
Target: ₹1,415
We met Bhavin Sheth, CFO of Kewal Kiran Clothing (KKCL), to understand the current business environment and future growth prospects. Our interaction suggests the increased focus of the management towards reviving revenue growth without putting much stress on margins and balance sheet.
KKCL is getting out of a conservative mode and is focusing on regaining its footing in the denim/casual wear space. Though the levers are in place, we expect the revival to take some time. Hence, revenue growth is expected to remain in the range of 8-10 per cent in the coming years. However, the OPM will continue to remain at 20 per cent+ as the company will focus on promotional offerings to consumers rather than spending more on brand building and media activities.
The working capital days are expected remain stable and hence, we expect balance sheet to remain de-leveraged (except for any significant acquisition). We maintain our Hold recommendation on the stock with an unchanged price target of ₹1,415 and would advise investors with long-term view to stay invested in the company, given its lean balance sheet and decent margin profile in the apparel space.