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Kitex Garments: Near Term Uncertainties
Nov 11, 2016

Kitex Garments announced the results for second quarter of financial year 2016-2017 (2QFY17). The topline fell by 7.5% and profits fell by 22% YoY in 1HFY17. Here is our analysis of the results.

Performance summary
  • Sales fell by 7.5% in 1HFY17 backed by fall in demand for both garment and fabrics. According to the management, the impending US elections was the key reason behind postponement of orders worth Rs 350m (finished goods inventory) in 2QFY17.
  • The fall in other income was due to a loss of Rs 33 m on account of forex losses.
  • Operating margins dropped to 20.1% due to pressure on realisations. Despite lower interest costs, net profits fell by 22% YoY in 1HFY17.

    Financial snapshot
    (Rs m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Total income 1,202 955 -20.5% 2,170 2,008 -7.5%
    Expenditure 891 749 -15.9% 1,681 1,604 -4.6%
    Operating profit (EBDITA) 311 206 -33.8% 489 404 -17.4%
    Operating profit margin (%) 25.9% 21.6% 22.5% 20.1%
    Other income 208 81 -61.1% 390 281 -27.9%
    Interest 44 19 -56.8% 92 45 -51.1%
    Depreciation 55 51 -7.3% 109 102 -6.4%
    Profit before tax 420 217 -48.3% 678 538 -20.6%
    Tax 149 87 -41.6% 247 202 -18.2%
    Profit after tax/(loss) 271 130 -52.0% 431 336 -22.0%
    Net profit margin (%) 22.5% 13.6% 19.9% 16.7%
    No. of shares (m)# 47.5
    Diluted earnings per share (Rs) 21.7
    P/E ratio (x) * 19.2
    *Based on trailing 12 month earnings
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