First of all, thank you for providing the link to the posts.
- If you read through the posts yourself, you’ll realize that the procurers like to keep their sources diversified. So, while Bangladesh/Vietnam seem to be acing the volumes game, India still owns a piece of the pie and will continue to do so. Here’s some baseline info from the Annual Report of Carter’s, one of the largest players in the US in Kidswear:
While we have no way of knowing if Kitex is one of the 3, we can safely say that the big players would at least like to keep their largest sourcing diversified.
As I always say, all stories/research about a company should show up in the number of the company. While I have the full force of hindsight bias behind me, the things claimed in the posts such as Kitex losing out on Market Share has not shown up in the numbers. In fact, even for the recent results, Sales has increased a bit in spite of Toys R Us going AWOL. If Kitex had received that money as well, Margins would have remained more or less the same. I’m just assuming here and we should wait for management commentary on this.
Kitex Garments / Indian Kidswear exporters do have a niche in exporting Kidswear. I suggest you read through this article: https://www.thedollarbusiness.com/magazine/baby-garmentsthis-is-indeed-a-big-deal-no-kidding/45848 (Notice how some of them point to the fact that India is at the nascent stages of this and needs to step up their branding game. I feel that Kitex is already there)
Once again, I do not understand why you keep comparing the broader textile industry to a specific, niche Kidswear industry. A more appropriate chart would be this:
This shows that over the last decade, Kidswear exports from India has grown by 3.5x (As opposed to the lower 1.5x-2x shown in your chart). Kitex’s Sales has grown by roughly 5x during the same period.
- Specific to Kitex, they are doing more Value-add to their sources while keeping costs reasonable. This is one of their most recent attempts:
Of course, we shouldn’t forget the upcoming Karnataka plant, which will benefit their Sales and Economics of Scale (Lesser costs).
- Let’s say I agree with you in stating that Kitex is mediocre. Even if you assign a very low Sales Growth of 10% to Kitex for the next 10 years (Essentially 2.5x in the next decade - Not an unbelievable estimate) and a considerate 5% for the Terminal period, with Kitex’s capacity to generate Owners’ Earnings, I think it’s still undervalued in Present Value terms.