Bombay Rayon Fashion Limited (BRFL) - Sify.comim.sify.com/.../14920243_BombayRayon_Sep09_Results.pdf · Firstcall India Equity Advisors Pvt Ltd Bombay Rayon Fashion Limited (BRFL)

Firstcall India Equity Advisors Pvt Ltd

Bombay Rayon Fashion Limited (BRFL)

BUY Target Price:Rs. 228.00

CMP: Rs.199.30 Market Cap: Rs.17359mn.

Date: 17 November,2009

Key Ratios:

Particulars FY08 A FY09 A FY10E FY11E

OPM(%) 25 24 25 25

NPM(%) 13 11 11 11

ROE(%) 20 17 16 16

ROCE(%) 15 11 11 11

P/BV(x) 3.51 1.38 1.67 1.40

P/E(x) 17.1 7.90 10.20 8.75

EV/EBDITA(x) 4.6 4.2 4.9 4.5

Debt

Equity(x)

1.21 2.01 1.81 1.68

Key Data:

Sector Textile Sector

Face Value 10.00

52 wk. High/Low (Rs.) 246.00/80.30

Volume (2 wk. Avg.) 150393

BSE Code 532678

SYNOPSIS

• Bombay Rayon Fashions is India's most dynamic,

professionally-managed, and fast-growing textile

group catering to a diverse range of high fashion

fabrics to its customers across the world. The

company is engaged in the manufacture and sale of

a variety of fabrics, garments and home textiles.

• Bombay Rayon Fashion Limited (BRFL) one of the

most versatile and technically advanced fabrics and

apparels manufacturers in India is all set to open

the largest textile plant in the country.

• The company owns 13 manufacturing facilities,

including one sampling unit across the country. It

has employee strength of 32000 people.

• The revenue of the company for the quarter ended

on Sept 30th increased 35% YoY while profit

increased 12% YoY.

• The topline of the company are expected to grow

at a CAGR of 24% over 2008A to 2011E.

.

Share Holding Pattern:

V.S.R. Sastry

Vice President

Equity Research Desk

91-22-25276077

[email protected]

Dr. V.V.L.N. Sastry Ph.D.

Chief Research Officer

[email protected]


Table of Content

Investment Highlights ................................................................................................................................... 3

Peer Group Comparison ................................................................................................................................ 5

Financials ....................................................................................................................................................... 6

Charts ............................................................................................................................................................ 8

Outlook and Conclusion ................................................................................................................................ 9

Industry Overview ....................................................................................................................................... 10


Investment Highlights

• Results Updates (Q2 FY10)

The bottomline of the company for the quarter increased 12% yoy that is Rs.410.35mn

from Rs.366.87mn of same period of last year. Total revenue for the second quarter

stood at Rs.3864.44mn from Rs.2870.25 which is 35% increase than that of a year ago

period. EPS for the quarter stood at Rs.4.71 per equity share of Rs.10.00 each.

Expenditure of the company increased 35% YoY to Rs.2945.87mn from Rs.2183.58mn of

same period of last year. Interest expenses for the quarter stood at Rs.225mn. OPM &

NPM for the quarter stood at 24% and 11% respectively.

Quarterly Results - Standalone (Rs in mn)

As at Sep - 09 Sep - 08 %Change

Net Sales 3864.4 2870.2 35

Net Profit 410.35 366.87 12

Basic EPS 4.71 5.31 (11)

Equity Capital 871 691


• Bombay Rayon to allot one warrants to promoter group company

Bombay Rayon Fashions has announced that the committee of the company’s board has

approved allotment of one crore convertible warrants to Raynold Shirting, the promoter

group company. Each warrant is convertible, at the option of the warrant holder, within

a period of 18 months from the date of issue, into one equity share of Rs 10 each for

cash at an exercise price of Rs 193.

• Bombay Rayon Fashions closes GDR issue

Bombay Rayon Fashions has decided to close the issue of Global Depository Receipts

(GDRs) to the person’s resident outside India from November 12, 2009 as it got fully

subscribed.


• Bombay Rayon opened its GDR issue

The company decided to open its proposed Global Depository Receipts (GDRs) offering

for subscription for the persons resident outside India.The company is looking to issue

up to 1.90 crore GDRs at an issue price of $5.11 each. Further, these GDRs will represent

equivalent underlying equity shares of Rs 10 each. Part of it would be used to fund the

working capital requirements of the new expansion in Maharashtra which is coming on

stream.

• BRFL to raise Rs.500cr via various routes

The company is looking to mobilize funds of up to Rs 500 crore from various routes.

• Bombay Rayon Fashions members approve fund raising plan

Bombay Rayon Fashions has received its members’ approval to raise funds of up to Rs

500 crore through various routes. The members of the company have approved issue of

securities by way of American Depository Receipts (ADRs) / Global Depository Receipts

(GDRs) / Foreign Currency Convertible Bonds (FCCBs) or any combination thereof

through public offer, private placement, Qualified Institutional Placements (QIP) in one

or more tranches for a total sum not exceeding Rs 500 crore.

Peer Group Comparison

Name of the

company

CMP

(As on 17

Nov, 2009)

Market

Cap.

(Rs. Mn.)

EPS

(Rs.)

P/E

(x)

P/BV

(x) Dividend(%)

BOMBAY RAYON

FASHION LTD 199.30 17359.03 21.49 9.27

1.38 15

ALOK INDUSTRIES 21.40 12961.9 3.41 6.28 0.60 7.50

VARDHMAN

TEXTILES 171.45 9904.6 17.65 9.71

0.78 20

RICHA INDUSTRIES

LTD 150.85 2553.2 4.24 35.58

4.20 -


Financials

12 Months Ended Profit & Loss Account (Standalone)

Particulars FY 08 A FY 09 A FY 10 E FY11 E

(Rs.Mn) 12m 12m 12m 12m

Net Sales 9,261.11 13,424.00 15840.32 17503.55

Other Income 177.61 47.88 100.55 110.60

Total Income 9,438.72 13,471.88 15940.87 17614.16

Expenditure -7,145.99 -10,211.13 -12054.5 -13197.68

Operating Profit 2,292.73 3,260.75 3886.38 4416.48

Interest -258.3 -659.63 -943.27 -1037.60

Gross Profit 2,034.43 2,601.12 2943.11 3378.88

Depreciation -318.52 -447.75 -601.8 -662.0

Profit before Tax 1,715.91 2,153.37 2341.34 2716.93

Tax -504.61 -668.38 -639.2 -733.6

Net Profit 1,211.30 1,484.99 1702.15 1983.36

Equity Capital 630 691 871.00 871.00

Reserves 5,289.65 7,834.33 9,536.48 11,519.84

EPS 19.23 21.49 19.54 22.77

*A=Actual, E=Estimated


Quarterly Ended Profit & Loss Account (Standalone)

Particulars Mar 09 A June 09 A Sep 09 A Dec 09 E

(Rs.Mn) 3m 3m 3m 3m

Net Sales 4,353.79 3,363.48 3,864.44 4250.88

Other Income 9.76 50.82 16.29 15.48

Total Income 4,363.55 3,414.30 3,880.73 4266.36

Expenditure -3,305.42 -2,567.44 -2,945.87 -3230.67

Operating Profit 1,058.13 846.86 934.86 1035.69

Interest -312.91 -209.8 -225 -240.75

Gross Profit 745.22 637.06 709.86 794.94

Depreciation -149.22 -146.86 -148.55 -155.98

Profit before Tax 596 490.20 561.31 638.96

Tax -243.96 -117.3 -150.96 -171.84

Net Profit 352.04 372.90 410.35 467.12

Equity Capital 691 871 871 871.00

EPS 5.09 4.28 4.71 5.36


Charts


Comparative Graph

Outlook and Conclusion

• At the current market price of Rs.199.30, the stock trades at a P/E of 10.20x and 8.75x for

FY10E and FY11E respectively.

• On the basis of EV/EBDITA, the stock trades at 4.91x and 4.52x for FY10E and FY11E

respectively.

• Price to Book Value of the stock is expected to be at 1.67 and 1.40 respectively for FY10E and

FY11E.

• The Net sales of the company are expected to grow at a CAGR of 24% over 2008 to 2011E.

BOMBAY RAYON BSE SENSEX


• BRFL one of the most versatile and technically advanced fabrics and apparels manufacturers

in India is all set to open the largest textile plant in the country.

• The company is looking to mobilize funds of up to Rs 500 crore from various routes. The

company decided to open its proposed Global Depository Receipts (GDRs) offering for

subscription for the person’s resident outside India.

• The company’s board has approved allotment of one crore convertible warrants to Raynold

Shirting, the promoter group company.

• BRFL has continued to see strong margins, as buyers reward its superior design and

execution skills. With increasing confidence in its margin sustainability, we recommend ‘BUY’

in this particular scrip with a target price of Rs.228.00. for Medium to Medium Term Gains.

Industry Overview

The Indian textile industry is one of the oldest and most significant industries in the country. It

accounts for around 4 per cent of the gross domestic product (GDP), 14 per cent of industrial

production and over 13 per cent of the country's total export earnings. In fact, it is the largest

foreign exchange earning sector in the country. Moreover, it provides employment to over 35

million people.

The Indian textile industry is estimated to be around US$ 52 billion and is likely to reach US$

115 billion by 2012. The domestic market is likely to increase from US$ 34.6 billion to US$ 60

billion by 2012. It is expected that India's share of exports to the world would also increase

from the current 4 per cent to around 7 per cent during this period.

India's textile exports have shot up from US$ 19.14 billion in 2006-07 to US$ 22.13 billion in

2007-08, registering a growth of over 15 per cent.

Textiles and Apparel Trade

As per the latest figures available with the Ministry of Textiles, India exported textiles worth

US$ 15.27 billion during April-December 2008.

Indian textiles, handlooms and handicrafts are exported to more than 100 countries, with the

US being the largest buyer. Readymade garments (RMG) are the largest export segment,

accounting for almost 41 per cent of total textile exports. RMG exports from India were worth


US$ 9.06 billion in 2007-08. During April 2008-February 2009, RMG exports were worth US$

8.59 billion, an increase of 4.86 per cent over the corresponding period of 2007-08.

Significantly, apparel is the second largest retail category in India. The domestic apparel

retailing industry is estimated to be round US$ 2.7 billion and in spite of recession is likely to

grow at 5-7 per cent in 2009-10. The domestic organized garment retailing clocked a growth of

13-14 per cent for year ended March 2009.

The accessories market is pegged between US$ 298.6 million and US$ 597.3 million, which has

been growing at 15 to 18 per cent. Within this, the branded accessories segment is growing at

25 per cent.

Investments in the Textile Sector

The domestic textiles and apparels market in India is witnessing strong growth owing to a

young population, an increase in disposable incomes and a rapid growth in organised retail.

Consequently, the domestic market is estimated to grow to over US$ 50 billion by 2014.

Significantly, the textile sector is estimated to offer an incremental revenue potential of no less

than US$ 50 billion by 2014 and over US$ 125 billion by 2020.

The textile industry has attracted FDI worth US$ 850 million during August 1991 and December

2008.

Textile and Apparel Sourcing

India is fast establishing itself as a global textile and apparel-sourcing hub with its abundant

multi-fibre raw material base, well established production bases, design capability and skilled

labour force.

According to the Confederation of Indian Industry-Ernst & Young Textiles and Apparel Report

2007, the Indian sourcing market is estimated to grow at an annual average rate of 12 per cent

from an expected market size of US$ 22 billion-US$ 25 billion in 2008 to US$ 35 billion-US$ 37

billion by 2011.

Simultaneously, world's cutting edge fashion brands such as Hugo Boss, Diesel and Liz Claiborne

are stepping up their sourcing from India.

Khadi


The Asian Development Bank (ADB) has offered to lend US$150 million to India to help revive

the popularity of Khadi. The revival of Khadi industry is expected to bolster employment

opportunities in India, particularly in the rural areas. India’s Eleventh Five Year Plan notes Khadi

production has huge employment prospects, particularly for women and minorities. A US$ 2

million grant will be provided by the Japan Special Fund through ADB to support the

implementation and monitor the progress of the Khadi industry reform package funded by the

ADB loan.

Technical Textiles

Technical or functional textiles are those textiles that have some functional properties attached

to it and are different from traditional textiles that are merely used for adoration. The technical

textiles market which at present is around US$ 80.1 million and growing at a healthy pace of

about 12 per cent, is expected to touch US$ 13.7 million by 2012-13.

Keeping this in mind, the government has designed Centres of Excellence for agrotech,

buildtech, meditech and geotech group of technical textiles at an outlay US$ 8.97 million. The

government will shortly launch a US$ 122.42 million Technology Mission on Technical Textiles

and also create a Development Council for Technical Textiles.

In an effort to promote the technical textile industry in the country, the central government has

formed a committee to put in place a regulatory framework for usage of technical textile

products in different areas.

Government Initiatives

In an effort to increase India's share in the world textile market, the government has introduced

a number of progressive steps.

• 100 per cent FDI allowed through the automatic route.

• De-reservation of readymade garments, hosiery and knitwear from the small-scale

industries sector in end-2000.

• Technology Mission on Cotton was launched in February 2000 to make quality raw

material available at competitive prices.

• Technology Upgradation Fund Scheme (TUFS) which was launched to facilitate the

modernization and up gradation of the textiles industry in 1999 has been given further

extension till 2011-12. A total of 18773 applications involving a project cost of US$ 24.91

billion have been sanctioned under TUFS upto March 31, 2008.

• 40 textile parks are being set up under the Scheme for Integrated Textile Parks (SITP)

which will attract an investment of US$ 4.38 billion.


In current times of a global meltdown, the government has come out with an economic

stimulus package for the textile industry. This includes:

• Additional allocation of US$ 285.66 million to clear the entire backlog in TUFS, which

would enhance cash flow of the exporters.

• Extension of interest rate subvention of 2 per cent on pre and post shipment credit

• Additional fund of US$ 224.42 million for refund of terminal excise duty.

____________________________________________________

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but we do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.


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Bombay Rayon Fashion Limited (BRFL) - Sify.comim.sify.com/.../14920243_BombayRayon_Sep09_Results.pdf · Firstcall India Equity Advisors Pvt Ltd Bombay Rayon Fashion Limited (BRFL)