S KUMARS - Results

It is not without reason it is said that the market is perfect. The market knows what is right and what is not and according values the stock. In the beginning of July, S Kumars Nationwide touched a new low, the same day on which the company announced that Singapore-based GIC Special Investments would invest Rs.900 crore in Reid & Taylor (India) Ltd, a subsidiary of S Kumars Nationwide. That is probably because the market knew what is in store when it came to the financial performance.

For the first quarter ended 30^th June 2008, on YoY basis, the company’s performance has taken a beating. Its net sales rose by a paltry 1.26% and this coupled with a 4.13% rise in operating expense, 25% rise in interest outgo and 2.5 times rise in tax outgo pulled down the profit margins. EBIDTA was down 10.46%. PBT was down 15% and PAT fell by 37% at Rs.26.86 crore. YoY, OPM fell from 20.15% to 17.81% and NPM fell from 11.26% to 7%.

The consumer textiles contributes about 60% to the sales, Reid & Taylor contributes 25%. Over the next three years, consumer textiles contribution is expected to be about 31 - 32% of the sales, Reid & Taylor is expected to remain the same, home textiles is expected to become an area of focus and is expected to contribute 17-18%. Infact the company has stated that in the domestic market, its ready-to-wear segment is going to be the fastest growing segment, but on the international front, high value cotton fabrics and home textiles are going to be the focus.

The company plans to utilize the Rs.900 crore coming in from the Singapore based company for enhancing manufacturing capacity, introducing new operating lines and adding brands. It would also be used for upgrading Reid & Taylor (India)’s Mysore facility. The mill has a capacity of 840,000 meters, and the capacity would be enhanced to 1,340,000 meters a year.

For now, the markets have given a thumbs down to the stock. It recovered from the new low it made at Rs.52 and is now at Rs. 67.
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