Crisil assigns valuation grade of 1/5 to Kewal Kiran

Crisil Research, in its report on Kewal Kiran Clothing has increased its fair

value estimate to Rs 1,004 from Rs 915 for the company, with the valuation grade of 1/5. Kewal Kiran Clothing's fourth quarter revenues and earnings were marginally above Crisil Research's estimates. Revenues grew 15.6 percent year-on-year to Rs 892 million driven by volume and realisations. However, owing to higher raw material cost as a percentage of sales, EBITDA margin contracted 251 bps year-on-year.

Despite a decline in EBITDA margin, adjusted PAT grew 25.5 percent to Rs 207 million driven by higher other income. Crisil is positive on the long-term growth prospects of the company considering its portfolio of established brands, wide distribution network and a healthy balance sheet. It has maintained a fundamental grade of 4/5.

Despite weak demand, Kewal Kiran's apparel volumes increased 8.4 percent year-on-year during Q4FY14. Average realisation per garment grew 4.3 percent. Kewal Kiran's balance sheet continues to be healthy with low gearing. Earnings estimates remained unchanged with fair value increased to Rs 1,004.

Crisil has further said that since the FY14 numbers were largely in line with its estimates, company maintains revenue and earnings estimates for FY15 and FY16.