Hope everyone goes through the Management Q&A quickly.
We need to bring everyone on the same page about a few things that anyone can argue doesn’t completely add-up. And we would like everyone to quickly get down to dissecting the following/help us look at this issues hard, in light of the detailed info/insights theis Q&A brings to You.
Request : Do not attempt to opine/answer any of the below without reading and absorbing the in-depth Management Q&A. Request Admin to actively moderate and delete any superficial/irrelevent comments that add no value to existing discussion.
1). KCL - KGL Management Discretion : This will always remain that Management will continue to have this discretion. We have tried to dissect this every which way we could, and should we now give the Management decisively, the Benefit of Doubt
2). It is certainly arguable that most of the Value Creation is now happening in KCL. KCL too can now boast of a $15mn client - The Children’s Place is a KCL Client - on par with the Gerber, Babies-R-US, and Carter relationships of KGL, and growing. The ultra-modern Garmenting factory that is showcased belongs to KCL. The Processing (Production) set up is completely owned in KGL though
3). Please note that 5.5 L pieces/day is achievable capacity. Installed capacity is higher. It is with 60% utilisation that current capacity of 5.5 L pieces/day is achievable. With 70% utilisation, the achievable capacity will go higher. Average Realisations are quoted at $1 to $1.25/piece - if that were the case group revenues would have been much higher than ~700 Cr (4 sundays and some holidays would account for some 24 days/month x 12 months x 0.55 Mn). So either Production or Average Realisation/unit is lower. We need specifics of Quantity produced over the years to resolve this
4). No of Blocks/lines with KGL and with KCL? Needs to be clarified clearly and match with per block revenue calculations - current figures provided do not add up. KGL needs to augment its Blocks - by when? How long should jobwork at KCL be continued?
5). Asset Turnover Magic: ~4 Cr Incremental Investment per Block vs 80-90 Cr ($13-15 Mn) achievable Revenues per Block??? Even if this were achievable, this can be the KCL story which buys out Fabric from KGL. For KGL, Fabric processing Capital Investment needs to be apportioned in
If everything above becomes too confusing to get a grip on, consider following:
In simpler words, the Q is : "Excellence in this business quality/execution can’t be denied. We couldn’t find a more practical way to answer these questions on what does not add-up, other than by
a) Participating in the story
b) Experience Management walk the Talk, as we stay invested and keep checking/asking
c) A set of specific questions at every interaction with Management"
That seems the only practical way to resolve what doesn’t add up? Can you?
Warning to Novice Investors: What doesn’t add up - are big gaps between stated and what seems to be the current picture (as per current understanding; we retain the right to modify this stance with new data/information, and/or when more clarity emerges from Management-speak)