Nagreeka Exports Ltd
(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
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.