Positive view
Yes if you purely look at cash and low PE multiple Kitex can become attractive . This business does not have any moat or competitive advantage . It is highly competitive business and only way to survive is to either improve productivity or move up value chain to control your destiny. So basically kitex is trying to do right things.
negative View
The Problem with Him is that it is getting harder to believe that he will give money to Shareholders, There was big question on 240 cr and then out of blue he announces same amount to put in capex . He had promised that Kitex will not need very large capex to double its revenue. He is not eccentric , there are serious concerns or let me put this way he is keeping everyone in dark about cash , his intentions to merge KCL and KGL , capex .
. He puts in even more money in CSR than giving dividends to share holders but not cut his own salary. Why he is not taking same amount of Salary money from KCL. If you wear a negative hat than these can be avenues of diverting money out of company for own use.
There totally lack of transparency. He is not stupid but very clever and trying to get maximum for himself.
We should collect data on negative and positive views and then make judgement . This is classic story for investing
Kitex has built a formidable competitive position which i think remains intact as of now. If it loses a big account then i would be worried as an investor. The odds of that happening need to be computed but are likely to be low. After looking at everything for the past few months my independent assesment is that there is nothing wrong with the business quality. I am actively tracking its cash flows and inventory for further confirmation. How cash is going to be deployed in the future is likely to give some hints. You could also look at the charts for a change in trend. Right now they seem bad.
If the lay of the charts change this would be a good option for some short term opportunistic bets.
Prima facie this figure seems to be wrong. In the last 2-3 years, KGL has a revenue run rate of roughly 550Cr and KCL has a revenue run rate of roughly 250CrâŚCombined this alone is around 800Cr without including competitors revenue figures. Also if I am not wrong, most of the above revenue is from 0-2yrs baby clothing only.
If 800 cr is the combined turnver and 90% of their revenues come from US. Then the US revenue is 720cr. The market share as per their assessment is 70%. Then the overall market size is not more than 1028 cr.
Very good assessment - there is another disclosure in the related party disclosure which is even more curious - the total payableâs to Mr. Sabu is in excess of 10 Crore(this was at 6 Crore odd for 2016) while his salary for the last full year is 7.5 Crore. The disclosure shows that he is some how retaining a lot his personal earning from the company with the company itself(indirectly helping the cash flow).
I know this company has been analyzed to death from investors and non-investors. But still couldnât resist sharing. Sounds familiar to me! ( from Pat Dorseyâs book - five rules )
Reviews of Lamaze Organic Products of Kitex Garments seems good.
Leading E-commerce websites like Amazon, Target, Toysrus, Buybuybaby, and others have good reviews for Kitex products.
A little disappointing year. We expected and had announced on growth, we had planned for automation. We wanted to do it on sewing side- people rarely do this. We wanted to do this because of labour issues. See China and their labour problems. People are not qualified- education is improving. Issue is not of salary its just that they donât want to work as they have to sit for 8 hours on stool so they donât want to work for long. if they cannot survive for first 6mnths-1yr-2yr, they move out, else they stay. New generation wants more freedom. Its not a big issue for us as of now but in next 10 years it may be a problem. So we wanted to double without increasing people. But, it didnât work. Its not that machine is not working. Its a famous company in Atlanta they do automation for jeans companies like levis etc. They donât have ready machine for children. Machine speed is 9000 stitches per minute but in children speed is 1000 per minute. Our research dept. is working for 3 yrs on that. We lost 1 yr - automation is successful its on the way in transit. in Q2, one set of machine will come. The machines are very expensive.
Before sewing there is cutting, expecting this automation we hired people and trained them so we could not utilize labour.
From 10% PBT we touched 30% PBT. No one can touch 15% PBT globally. Unfortunately, we came down due to these unexpected things. we are confident of coming back.
We started US operations in Nov16. Our Co works with big companies like JC Penny, Gerber, ToysRUs etc. We could launch our brand in US. We could get in 3 big customers-> walmart, amazon, target. We are expecting good demand. Garment is sold by season. Today what we are selling is for june, july 18. Result will take some time. Once our goods are in stores people will buy they will come back. It will take 3-4 years, then sky is the limit. Initially, its an issue. There are no people in organic clothes. Other people are selling regular stuff. 0-2 is very sensitive age and people prefer to buy organic. we feel this concept will do very well. once we are established, we can break the existing market.
We won 1st vendor award from ToysRUs. We got award in 11,12 and have been consistently in top. 2016 we got the award again. there are 220 vendors. Hearing same from Gerber of being the best vendor.
Another bad thing happened is dollar- its a short-term issue as we have a very clear understanding with customer to adjust for currency or cotton in next season order.
We have good relation with all these top people/Co.
2020 is the real goal.
KCL will be listed and merged (canât commit on the timeline).
You all invested with lot of trust- we wonât let you down. 2020 is the real goal.
Q&A:
* We started business with Carter. Its a listed Co. They also have to manage inventory so some of the shipments happened on 2nd april instead of 31st march.
* Inc in processing charges-> sometimes machinery breakdown etc happens so we do job work from KCL. We pay just 6-8 Rs. per pc.
* Last year we tried to automate the sewing area but the machine today are for bigger size but we are in 0-24 months. So this machine has to be customized. So they started developing some changes but they couldn't fix it.
* We thought we could do automation but unfortunate that there were some problems. We are in continuous discussions and R&D and hope for better outcome in coming months.
* Didn't do concall as had US travel at that time and the schedule didn't match.
Kitex Shareholding out :
I think Sanjoy Bhattacharyya one of the top value investor, via ICGQ Limited increased holding to 1.05% in Kitex Garments . After sanjay bakshiâs valuequest investment, more investor buying at lower levels
Kitex to touch 650 crores this year, targeting Rs 2000 crores by 2020.
Will be surprised if its for Kitex Garments alone.
I guess MD might have taken Kitex childrenwear too.
-It presently sells at 28000 stores in US. -6 lakh clothes are being manufactured every day. In 2020 it will be 11 lakh!
