I think I am missing some basic competitive advantage that Kitex has over Bed linen exporters which I am struggling to identify.
Is it that bed linen manufacturing is machine oriented work and can be replicated relatively easily whereas infant wear manufacturing is highly labor intensive and is not easily replicable? Also In infant wear, earning the trust of MNC retailers who would be requiring very high standards of product quality and safety apart from employee well being is the big competitive advantage that Kitex enjoys?
The competitive advantages of KGL being trumpeted are 2ā¦
(1) KGL has scale advantage and is thus a low cost producerā¦
Personally, I find it funny that a company with only 500 crores of sales is considered to have scale advantagesā¦ 500 crores is a puny-sized company, by any standardsā¦
(2) Customers of KGL donāt switch easily, due to switching costs.
I havenāt done much research - but I doubt any of these large MNC customers work with only 1 or few suppliers. They probably have a dozen or more suppliers for infant wearā¦ So, switching shouldnāt be a problemā¦
Then the question to ask is, what is the source of the high RoCE being enjoyed by KGL? (Note: Indo Count doesnāt have such great return ratios, so competitive advantages may not be presentā¦)
Hi I am new to VP and hatās off to the great knowledgeable investor community.
I am very passionate about investing, being a scientific person not very good at accounts ( but quick learner with the VP community ) but yes I am good at recognizing moat and business.
I would like to know why kitex garments has put 200 crores cash in current account and not investing it in short term debt funds for bank FDās.
When I read the Q & A of the management came to know that they were refused by lenders to lend money due to high debt of Kitex childrenwear books.
As they are going to merge the two entities and already appointed E&Y for the same.
Is there anything to do with the debt on kitex childrenwear ( skeptical about that ) and there could be equity dilution ( may be,my hypothesis ),or this cash will be used to repay the debt of kitex childrenwear ( donāt know, just my assumption )
I have very high conviction for this company.
.As per my understanding almost all capex has been completed by KGL ( I may be wrong ).
Recent declaration by government to give interest subvention to textile sector with add 9 - 10 crores to KGL bottomline ( according to Mr Sabu interview ).
Can anybody from our forum help me to understand the reason behind it.
Disc : safe to assume that I am invest in KGL and would like to increase the exposure
Salient points from the notes, rather than putting the link:
Chairman Speech:
The s.oss rcvenue rouched Rs 525 Cr. which is more than 15% from last year
EBITDA was at 162.99 Cr which is up by 73% YoY
EPS increase to 20.74
Infant wear is growing at 4% annually in US
Company is trying to aquire few brands in US that will bring additional $5-$10 Mil in revenues( i think there was a typo in report) and expects to grow by $50mil in 2020
Also Management discussed on following topics(no specific details given)
a) Future growth of the company
b) Higher percentage on dividend
c)Market share in Garment sector in US
d)factor which affect quality of infant wear
e)Plant utilization in fabrics and processing
Dividend: 125% on Rs.1 FV
I will put some more as copy paste is difficultā¦
I listed to the q4 con call. His ending remarks were something like. āThank you for all your support. Because our stock price has gone up like anything in the last yearā.
I was surprised to hear a ceo taking about stock price. I have never seen such a thing in any other company con call.
Another thing that is putting me off in Kitex is that they are holding forex without investing it. They are speculating that the value of USD vs INR will go up in the future.
Kitex mentioned that they are targeting 600 cr sales this year which is 25% up vs FY14-15. This Q1 sales is flat 96.82 vs 96.18. But generally Q1 to Q4 only gets better for Kitex. Let us see whether it catches up.
The growth of June 2015 Vs June 2014 seems to be similar to June 2014 Vs June 2013. As the sales get better from Q1 to Q4, the target of 600 Crs might be achievable.
Sabu Jacob came on CNBC sometime back and clarified that 1Q is seasonally weak, dont extrapolate remaining quarters from 1Q and that he re-iterates 600-650crs sales guidance for FY16
