Indian Rayon – Garments hold the key - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Indian Rayon – Garments hold the key

Sep 14, 2000

Van Heusen, Allen Solley, Louis Philippe, Peter England, Byford, and San Frisco… Indian Rayon has transformed itself from a mere commodity player to a brand oriented company. With its core businesses also showing positive trends, the company deserves a re-look. Though the company’s core businesses like Viscose Filament Yarn (VFY), carbon black and insulators suffered as a result of lower growth both in terms of volumes and values in FY00, the future driver is likely to be garment business. The company has more than 30%-32% market share of the branded apparel market. The market is growing at the rate of 30% per annum. By FY04, assuming that the company maintains the same market share i.e. 32%, we are looking at a turnover of more than Rs 5 bn just from garment business alone. Garments currently contribute towards 18% of turnover for FY00 (on an annualized basis).

After a prolonged slump in its other businesses, the outlook seems to be changing for the better. The prospects for the VFY business are improving since the prices of Polyester Filament Yarn (PFY) hitting new highs thanks to the persistent rise in crude prices. PFY, is a substitute to VFY as the former was a relatively cheaper alternative. This would result in better volume growth for VFY in the current year. (Indian Rayon is the 2nd largest manufacturer of VFY in India.)

The insulator demand is also likely to pick up coming years with the entry of private players in the power sector. The demand for insulators as a whole depends on the power sector reforms and investment in power generation and distribution networks.

Though the carbon black division registered a 24% growth in sales in 1QFY01, realisations were under pressure due to rise in feedstock prices by 87% (overall margins for the company have fallen by more than 2% in 1QFY01). This is more likely to continue as crude prices touched US $ 35 last month, which will have its effect on the feed stock prices.

To sum it up, even if the garment division posts report good growth for the current year, overall turnover growth is expected to be around 15% for FY01 as both realisations and margins are expected to come under pressure. However, growth lies in the garment business where Indian Rayon intends to spend around Rs 300 m towards brand building and enhancing distribution network that includes Trouser Town, Dress Circles and franchisee showrooms. Increasing customer focus, strong brands, focused management would enable the company to leverage on brands and emerge as the market leader in coming years.

The stock is trading at Rs 64 at a P/E multiple of 4.8x on the annualised 1QFY01 earnings. The market capitalisation to sales ratio works out to 0.32 (Market cap – 3,832 m)


Equitymaster requests your view! Post a comment on "Indian Rayon – Garments hold the key". Click here!

  

More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

Can the Nifty Fall to 10,200? (Fast Profits Daily)

Sep 24, 2020

The Nifty has reached an important support level today. If it breaks then we could see further downside.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

ADITYA BIRLA NUVO SHARE PRICE


Jul 4, 2017 (Close)

TRACK ADITYA BIRLA NUVO

  • Track your investment in ADITYA BIRLA NUVO with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON ADITYA BIRLA NUVO

ADITYA BIRLA NUVO - MAX FINANCIAL SERVICES LTD COMPARISON

COMPARE ADITYA BIRLA NUVO WITH

MARKET STATS