Na­greeka Ex­ports Ltd

Money Times - - Market Outlook | Stock Analysis -

(BSE Code: 521109) (CMP: Rs.43.45) (FV: Rs.5) By Rahul Sharma

In­cor­po­rated in 1989, Na­greeka Ex­ports Ltd (NEL) is a flag­ship com­pany of the Na­greeka group, pro­moted by Mr. I. L. Patwari and fam­ily. Led by Mr. Sushil Patwari, Chair­man, NEL is en­gaged in the man­u­fac­ture and ex­port of cot­ton yarn and other mer­chan­dise. Its prin­ci­pal busi­ness ac­tiv­i­ties in­clude cot­ton yarn spin­ning (77.12% of to­tal rev­enue) and fab­ric knit­ting (12.91%). The bal­ance rev­enue is gen­er­ated from other mer­chan­dise prod­ucts. It is en­gaged in the busi­ness of trad­ing cot­ton yarn and var­i­ous com­modi­ties and is also a mer­chant ex­porter. Its prod­ucts in­clude cot­ton yarns in­clud­ing combed, carded, open end and com­pact yarns; spe­cial­ity yarns such as or­ganic yarns, slub yarns, core spun yarns, poly vis­cose blends, polyester cot­ton blends, vis­cose cot­ton blends and or­ganic slub yarns. It sup­plies a range of fab­rics in open width as well as tubu­lar body di­am­e­ter.

NEL has set up a 100% ex­port ori­ented unit (EOU) with a state-of-the-art plant at Kol­ha­pur in Ma­ha­rash­tra, which has a man­u­fac­tur­ing ca­pac­ity of 55,440 spin­dles. It has also set up a yarn dy­ing and cot­ton bleach­ing plant at Ka­gal Kol­ha­pur. Ex­ports con­sti­tute over 50% of its turnover. It ex­ports to Korea, Mau­ri­tius, Tai­wan, Hong Kong, Italy, Bangladesh,

Turkey, Cyprus, Canada, Ger­many, Switzer­land, Sin­ga­pore, Malaysia, Do­mini­can Repub­lic, etc. It was also awarded the In­ter­na­tional Stan­dard Or­ga­ni­za­tion cer­tifi­cate for its ex­port per­for­mance.

The In­dian cot­ton tex­tile in­dus­try will con­tinue to grow along with the ris­ing con­sump­tion of tex­tile and yarn prod­ucts in In­dia and abroad. NEL will also ben­e­fit from for­eign ex­change fluc­tu­a­tions. In­dia’s GDP is ex­pected to grow at 7.2% in 2017-18 and the tex­tile sec­tor is one of the largest con­trib­u­tors to In­dia’s ex­ports (~11% of the to­tal ex­ports). GST ben­e­fits for the tex­tile in­dus­try will help boost the de­mand for the cot­ton tex­tile in­dus­try. The In­dian tex­tile and yarn in­dus­tries are ex­pected to grow rapidly over the next 4-5 years. Gov­ern­ment ini­tia­tives like the Prad­han Mantri Credit Scheme, pro­vid­ing mar­gin money sub­sidy for knitwear projects, set­ting up new knitwear ser­vices cen­ters on the PPP model, etc. will boost the knit­ting in­dus­try thereby ben­e­fit­ting NEL.

In Q1FY18, NEL re­ported to­tal in­come of Rs.1471 mn (up 9% YoY) with PAT of Rs.4.8 mn v/s a loss of Rs.20 mn in Q4FY17 and a loss of Rs.0.9 mn in Q1FY17. We ex­pect the strong per­for­mance to con­tinue go­ing for­ward. FY17 PAT was low due to higher de­ferred tax li­a­bil­i­ties.

At the CMP of

Rs.43.45, the stock trades at a

P/E of 33.3x on its EPS (TTM) of

Rs.1.28.

The stock is avail­able at a dis­count com­pared to the S&P BSE Small-Cap P/E of 84.9x and Nifty Small-Cap 250 P/E of 76.7x. There­fore, we have a Buy on the stock with a price tar­get of Rs.60.

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