Too much politics going on.
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Inventory Turnover Ratio (X) over the years has been dipping :
2020 2019 2018 2017 2016
5.67 4.71 6.35 13.48 41.91
The ratio has drastically fallen from 41 to 5. Is this a sign of overstocking or a symptom of an underlying issue ?
Even the net profit margin has been declining over the years
2020 2019 2018 2017 2016
14.70 13.42 12.56 16.89 20.53
I have started looked at these ratios only recently, so I want to understand if these ratios are indicators of bad health or if these can be ignored in view of other aspects.
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Public content share :
Disc : invested , this is not any recommendation to buy or sell
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Twenty20 retained the Kizhakkambalam panchayat in the local body election 2020 !.
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I am curious, does the political ascendency of their CSR arm has any notable impact on Kitex’s business?
The reason they ventured into politics is that it was the need of the hour. The governing local body was bullying them on many fronts so he had no choice but to win the people’s hearts to gain control of the Kizhakkambalam Gram Panchayat where the factory is in, which he did and it turned out to be a blessing for the people there.
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This company seems to have good earnings yield, ROCE, part of re-opening theme, why has this not run up yet, are promoters dabbling with politics a red flag ? what else am I missing
Disc. very small position I take while researching the company
Guess underperformance with respect to guidance and general mistrust of the management is one cause. However from a little scuttlebutt, seems like the reputation (of their other local businesses) amongst its customers is good. Not sure why that trust is not transferred to Sabu Jacob. Unless he is known to be doing something wrong, we should give him the benefit of doubt. Also, the performance has been up and down. Would have to wait and see how they do once the covid clouds lift.
Disc: Investing in small increments on dips.
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Kitex is located in Kizhakkambalam panchayat(KITEX came from that name, KIzhakkambalam TEXtiles). They had issues with Panchayat regarding pollution norms/licensing etc. earlier. They floated a party 20/20 in 2015/16 and won the panchayat election. From what I hear they did extremely good work using panchayat /CSR funds and got re elected. So at this moment it shouldn’t have an impact on the company’s business except Sabu Jacob is spending considerable amount of time in politics.
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I am invested from last three years and sharing an recent article about the company and it’s involvement in 20-Twenty … which is disturbing but with different lens it can be seen as maligning image article regarding the company … The intent of the author I am not sure … but if the author is so concerned why he hasn’t file PLi ( public litigation case ) in court … Different people different perceptions … …but in investing what I believe is ANTHYTHING and EVERYTHING is questionable …
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Just my Opinion, Trade Receivables and Inventories of the last 3 years are huge compared to the trade payables and other current liabilities. I think this implies poor working capital management and because of which a lot of cash is blocked in the business. Maybe that has led to lower margins and reduced profitability.
On the other hand, company has cleared almost all of its borrowings so its saving a lot of interest exp and also it increased its gross block to 330 cr(in Mar 2020 BS) from 195 cr(In Mar 2017 BS), so we should be seeing a lot of new capacity utilization, sales growth, increased margins and maybe better valuations given that the order book stays strong and consistent, and no external issues disrupt the operations.
Half page ad in todays daily with Mr Sabu’s picture indicating foray of 20-20 into upcoming kerala assembly elections.
Politics is a zero sum game unlike entrepreneurship!!
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I was listening to Andrew Yang on the Making Sense podcast talk about the devastation of various sectors of the New York economy and the exodus of a significant portion of the population from New York due to covid causing irreparable damage to sectors like tourism and linked sectors. Could this state of the economy in the USA explain the performance of Kitex Garments Limited? If yes, then is the market probably not anticipating a reversion to mean and thus undervaluing the company?
Disappointed to see another poor set of numbers from Kitex(see the result here.
The topline and bottom line are at multi year lows. Inventories continue to be at elevated levels. Reduction of trade receivables may bring some cheer which helped payout the outstanding debts and improve the cash position(note that the AR continue to be at elevated levels and in all probability these are with the associated front end entity based out of USA). The business in general must have been in disarray considering amount of time Mr. Sabu Jacob has spared on social/ political front - hope he understand that the prosperity of his thoughts and actions in private/ social front are directly related to the returns he generate from this business. He should spend his time to capture the opportunity available infront of him instead of spending valuable mind space on matters which are more in the nature of distraction.
Kitex continues to be a golden goose with a huge opportunity to unlock. The infrastructure they have developed(especially investing into the well being of its staff) is difficult it replicate.
Also note that we have no update on the merger of the entities which was announced many years back and was expected to get complete by 2020(old times here will know what I’m talking about).
AJ
Invested at elevated levels and continue to hold. Not averaging until turn around is visible.
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It appears the Govt is on a retaliatory mode , today Sabu mentioned there were 11 raids in the last one month, the only intention seems to be to harass the organisation. Recently the local MLA who is part of the opposition party in the assembly made few remarks on Kitex , so effectively the Kerala politicians both ruling and opposition are haunting Kitex. Needless to say why entrepreneurs turn their back on Kerala !
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Still no information to the exchanges regarding scraping of expansion plans…
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That’s exactly the reason one should exit the company as soon as you hear promoter entering into politics and running election to get elected as Corporator/MLA/MP . Amara raja is another example…
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