Clearly the results are disappointing(mainly topline growth) after what Mr Sabu Jacob said in his Q3 confcall. Anyways there is no surprise here - Mr Sabu has always been bullish in his commentary and projections. But the numbers have been consistently below par for quite sometime now.
Personally I have not doubted the cash part(check my previous post for the reason I think so). Also if one considers the cash movement by looking at the balance sheet YoY then it roughly seems to tally. However the finance cost still continue to be high. Mr Jacob mentioned in Q3 confcall(in response to Ayushâs query) that it is because of bank charges,guarantees for exports etc. I am yet to cross-verify this statement from another source.
Inventory and receivables are high YoY. Clearly working capital is deteriorating. Need to understand why this is the case in the conf call.
The huge capex plan is a surprise. Need to understand this too.
Upto 100Cr could be invested in liquid investments. Need to track this too in the next year.
Unfortunately there are more questions right now than answers (at least to me).
Disc: Invested for long(3 years). Views might be biased.
I remember reading some interview when the MD said, for kitex Q1 > Q2 > Q3 > Q4. I am surprised at the top line dgrowth. Could this be because of slowdown of population growth in the US?.
Also, the steep fall in bottom line is surprising. As per the MD, they have technology, automation, efficiency etc. Then I wonder why the profit fell? The cocall should throw some light.
I exited this stock, booking losses few quarters back.
I certainly got attracted initially with quite a few respected investors being there and also reading about few articles and interviews.
But with few quarters of commentary, i found my self very uncomfortable with Sabu Jacobâs style of answering questions in Earning Calls. To me it was more casual, least respect for what he projected in earlier calls and always sounding more bullish than telling about issues faced by company if any.
With all due respect to the company and Promoters, i found something missing as a coherent story.
At the end i gave up for peace of my mind!
Kitex seems to have wiped out almost all their debt as per the latest BS published to the exchanges. ST Debt = 0 and LT Debt ~ 3 Cr. Its a good sign according to me. any comments from those tracking the stock?
@bheeshma: Regarding your Q1, pls check latest BS, seems like they have used their cash to clear off almost all the debt. This to me is the strongest sign that the question marks on the cash sitting on their BS is unfounded. Happy to hear any counter views.
As most of its revenue is generated from US market, so the appreciating INR against USD might also affect the revenue and margins in coming short period.
Reductions in debt is also a good sign. Seems like Monday would be a good opportunity to acquire more of it.
other expenses have shot up from 62 cr to 88.5 cr , most of it in Q4. clarity will come from mgmt tomorrow most likely, but i feel it could be related to setting up of design center in US and other marketing expense.
other income down from 19.81 cr to almost 2 cr. actually as of dec, 2016. I checked last year annual report and most of this income comes from forex gains, so, my guess is this could be due to USD INR adverse movement in Q4, where INR has strengthened by 6-7%.
key concern will be over bullish mgmt and not being able to deliver on guidance, which will make investors nervous. if we discount mgmt guidance, its a growing business with one year of flattish revenues and declined profitability due to higher other expenses/lower other income.
good part is long term debt down to minimal and short term debt paid off and PAT margins are intact. So, mostly a debt free business with good return ratio struggling to grow. So its a call on mgmt capability to grow business from here , get revenues in new lines of business like own brand etc.
This is to inform yon that ET Now will be telecasting the first interview on Tuesday, May 2, 2017 at 10.15 A.M in their show "The Marketââ following the announcement of financial results for the year ended 31.03.2017 in our Board Meeting held on Friday April 28, 2017.
ET Now - Sabu says that a customer shifted 25cr order to April which will be recovered in Q12018. Secondly, the labor cost increased due to delay in Automation.
What can we make of it? I am convinced of the fundamentals, however, undecided about the commitment of the management towards shareholders.
There seems to be an inverted cup and handle formation (not a classic one as in its proper form the handle formation time has to be shorter than the cup formation time. This looks more like a lemon squeezer!). Would wait for awhile to see if it does what it does.If the pattern is correct & the handle breaks then its telling us that prices will be under severe pressure in the coming days.
Yes he again has promised better growth to Q1 and Q2 FY18. Lamaze and Little Star doing well and being accepted.
He mentioned Little Star would now be sold in Walmart stores, which he sees as a great opportunity
This he also mentioned of some 20 cr forex loss.
On Margins falling , he mentioned that should be back to normal next two quarters.
As for me i would still wait out for next few quarters and keep a close eye on numbers.
Disc : Invested.Not a stock recomendation. Please do your own research.
Forex loss should continue in Q12018 as they take order of six months in advance. Future orders will be adjusted for currency fluctuations. Besides he mentioned something about eliminating seasonality and bringing parity in all four quarter sales with 10%(+/-) variation.
If Kitex is trying to promote its own brand in the US, wouldnât its existing customers find it better to buy from Kitexâs competitors than Kitex itself? Are they competing with their own customers? Is my understanding of their clientele wrong?
Kitex said that it approved investment of 1.5 mn USD into Kitex USA in which it has 50% share holding. How do they do that? I understand that it will not be sitting as debt in the Kitex USA account. And another 50% of Kitex USA is with Mr. Sabu through Kitex Childrenware.
