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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.

Net Sales and PAT of the company are expected to grow at a CAGR of 24% and 24% over 2009 to 2012E respectively.

During the quarter, the profit of the company rose 12.60% to Rs 531.8 million from Rs 472.3 million in the same quarter previous year.

Years Net sales EBITDA Net Profit EPS P/E

FY 10 16147.66 4031.79 1759.19 15.72 18.45

FY 11E 21904.22 5906.28 2258.53 17.66 16.42

FY 12E 25846.98 6891.99 2820.68 22.05 13.15

Stock Data:

Sector: Textile

Face Value Rs. Rs.10.00

52 wk. High/Low (Rs.) 293.75/179.05

Volume (2 wk. Avg.) 44000

BSE Code 532678

Market Cap (Rs.In mn) 37091.00

Share Holding Pattern

1 Year Comparative Graph

Bombay Rayon Fashions Ltd

BSE SENSEX

C.M.P : Rs.290.00 Target Price : Rs.336.00 Date : 30th April 2011 BUY

BOMBAY RAYON FASHIONS LTD

Result Update: Q3 FY 11

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Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Bombay Rayon 290.00 37091.00 15.72 18.45 1.70 15.00

Welspun India 58.65 5218.5 8.53 6.88 0.83 10.00

Pradip Overseas 82.40 3326.2 0.00 0.00 1.59 0.00

Alok Inds 26.70 21033.8 3.96 6.74 0.77 2.50

Investment Highlights

Q3 FY11 Results Update

Bombay Rayon Fashions Ltd disclosed results for the quarter ended December

2010. Net sales for the quarter moved up 30% to Rs.5441.78 million as compared

to Rs.4179.37 million during the corresponding quarter last year. During the

quarter, the company has reported Net Profit increased to Rs. 531.87 million from

Rs. 472.34 million in previous year same quarter. The Basic EPS of the company

stood at Rs.4.16 for the quarter ended December 2010.

Quarterly Results - Standalone (Rs in mn)

As At Dec-10 Dec-09 %change

Net sales 5441.78 4179.37 30

PAT 531.87 472.34 13

Basic EPS 4.16 4.45 -

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Basic EPS of the company stood at Rs. 4.16

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Break up of Expenditure

Expenditure for the quarter stood at Rs.4040.85mn, which is around 28% higher

than the corresponding period of the previous year. Consumption of Raw

Material cost of the company for the quarter accounts for 59% of the sales of the

company and stood at Rs.3203.05mn from Rs.2581.99mn of the corresponding

period of the previous year. Other Expenditure Cost increased 22%YoY to

Rs.596.7mn from Rs.487.23mn and accounts for 11% of the revenue of the

company for the quarter.

OPM and NPM for the quarter stood at 27% and 10% respectively from 25% and

11% respectively of the same period of the last year.

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Company Profile

Bombay Rayon Fashions, also known as Bombay Rayon Fashions Ltd., is an India-

based textile manufacturing company. Bombay Rayon Fashions is based out of

Mumbai and this textile group is one of the leading textile companies operating in

India.

The business activities of Bombay Rayon Fashions Ltd. involve manufacturing of

textiles for domestic and office use. Within a span of 2 decade, this company has

grown by leaps and bounds. 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. Bombay Rayon is an innovator

and manufactures versatile and technically advanced ranges of fabrics, apparels, and

home textiles. Bombay Rayon is a US$ 45 million company and employs around 5,000

personnel in its facilities. The state-of-the-art manufacturing facilities of Bombay

Rayon are well networked with wholesalers, distributors, and retailers across India. It

exports 100% of its garments to USA and European countries. Its clientele includes

major brands like Tom Tailor, DKNY, and Liz Clairborne.

Company Products

Products offered by Bombay Rayon Fashions are as follows -

Fabrics - Bombay Rayon is a leading supplier of quality fabrics worldwide.

Bombay Rayon offers a large variety of fabrics at affordable prices to fit every

occasion. It offers premium shirting, suiting, voiles, and fashion garments.

Apparel - Bombay Rayon offers a wide range of both, casual and formal apparel

to suit every event.

Home Textiles - Bombay Rayon established this segment to primarily focus on

the exports of beddings for both adults and infants. It also includes home

furnishings and home textiles.

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Subsidiary Companies:

Bombay Rayon Holdings Limited (BRHL)

DPJ Clothing Ltd., U.K.

BRFL Europe B.V., Netherlands

BRFL Italia S.r.l, Italy

Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in million) FY09A FY10A FY11E FY12E

12m 12m 12m 12m

Description

Net Sales 13424 16147.66 21904.22 25846.98

Other Income 47.88 156.61 163.60 171.78

Total Income 13471.88 16304.27 22067.82 26018.76

Expenditure -10211.13 -12272.48 -16161.53 -19126.76

Operating Profit 3260.75 4031.79 5906.28 6891.99

Interest -659.63 -935.44 -1486.17 -1585.93

Gross Profit 2601.12 3096.35 4420.12 5306.07

Depreciation -447.75 -680.65 -1430.71 -1545.16

Profit before Tax 2153.37 2415.70 2989.41 3760.90

Tax -668.38 -656.51 -730.88 -940.23

Profit after Tax 1484.99 1759.19 2258.53 2820.68

Equity Capital 691.00 1119.00 1279.00 1279.00

Reserves 7834.33 17974.17 20232.7 23053.38

Face Value(Rs.) 10.00 10.00 10.00 10.00

EPS 21.49 15.72 17.66 22.05

*A=Actual, *E=Estimated

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in million) 30-Jun-10 30-Sep-10 30-Dec-10 31-Mar-11

3m(A) 3m(A) 3m(A) 3m(E)

Description

Net Sales 5026.99 5231.82 5441.78 6203.63

Other Income 22.04 36.16 50.19 55.21

Total Income 5049.03 5267.98 5491.97 6258.84

Expenditure -3747.47 -3751.51 -4040.85 -4621.7

Operating Profit 1301.56 1516.47 1451.12 1637.13

Interest -309.69 -333.3 -407.43 -435.75

Gross Profit 991.87 1183.17 1043.69 1201.39

Depreciation -290.09 -324.03 -392.59 -424

Profit before Tax 701.78 859.14 651.1 777.39

Tax -180.09 -237.21 -119.23 -194.35

Profit after Tax 521.69 621.93 531.87 583.04

Equity Capital 1119.00 1119.00 1279.00 1279.00

Face Value(Rs.) 10.00 10.00 10.00 10.00

EPS 4.66 5.56 4.16 4.56

*A=Actual, *E=Estimated

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Key Ratio

Particulars FY09 FY10 FY11E FY12E

EPS (Rs.) 21.49 15.72 17.66 22.05

EBITDA Margin (%) 24.29% 24.97% 26.96% 26.66%

PAT Margin (%) 11.06% 10.89% 10.31% 10.91%

P/E Ratio (x) 10.55 18.45 16.42 13.15

ROE (%) 17.42% 9.21% 10.50% 11.59%

ROCE (%) 10.95% 7.63% 9.41% 10.35%

EV/EBITDA (x) 4.81 8.05 6.28 5.38

Debt-Equity Ratio 2.01 1.30 1.21 1.12

Book Value (Rs.) 123.38 170.63 168.19 190.25

P/BV 1.84 1.70 1.72 1.52

Charts:

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Outlook and Conclusion

At the current market price of Rs.290.00, the stock is trading at 16.42 x FY11E and 13.15 x FY12E respectively.

Price to Book Value of the stock is expected to be at 1.72 x and 1.52 x respectively for FY11E and FY12E.

Earning per share (EPS) of the company for the earnings for FY11E and FY12E is seen at Rs.17.66 and Rs.22.05 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 24% and 24% over 2009 to 2012E respectively.

During the quarter, the profit of the company rose 12.60% to Rs 531.8 million from Rs 472.3 million in the same quarter previous year.

On the basis of EV/EBITDA, the stock trades at 6.28 x for FY11E and 5.38 x for FY12E.

The Company believes opportunities are expected to continue to arise as it anticipates and responds to the ever changing global marketplace. The Company will continue to focus on exports and making in-roads into the

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domestic retail market. The Company's desire to continue to look at better and more efficient ways to become a complete apparel company will continue to drive its business strategy into the future and confirm BRFL's strength as a global player with local execution skills. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.336.00 for Medium to Long term investment.

Industry Overview

The Indian textile industry contributes about 14 per cent to industrial production, 4

per cent to the country's gross domestic product (GDP) and 17 per cent to the

country’s export earnings, according to the Annual Report 2009-10 of the Ministry of

Textiles. It provides direct employment to over 35 million people and is the second

largest provider of employment after agriculture.

The industry is expected to grow from the present US$ 70 billion to US$ 220 billion by

2020, according to Mr Dayanidhi Maran, Union Minister of Textiles.

Major Developments

The total cloth production has increased by 2.9 per cent during December 2010 as

compared to December 2009, according to the Ministry of Textiles. The highest growth

was observed in the powerloom sector (3.7 per cent), followed by handloom sector (3.3

per cent). The total cloth production during April-December 2010 has increased by 2.3

per cent compared to the same period of the previous year. The production of spun

yarn and cotton yarn increased by 6.0 per cent and 8.6 per cent, respectively during

December 2010 as compared to December 2009.

The total textile exports during April-September 2010 (provisional) were valued at US$

11275.58 million as against US$ 10115.78 million during the corresponding period of

the previous year, registering an increase of 11.47 per cent, as per the latest data

released by the Directorate General of Commercial Intelligence and Statistics

(DGCI&S), Kolkata.

Cotton textiles have registered a growth of 10.8 per cent during April-January 2010-

11, while textile products including wearing apparel have registered a growth of 4.3

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per cent, as per the Index of Industrial Production (IIP) data released by the Central

Statistical Organisation (CSO).

India has the potential to increase its textile and apparel share in the world trade from

the current level of 4.5 per cent to 8 per cent and reach US$ 80 billion by 2020, as per

a Ministry of Textiles press release dated November 2, 2010.

Technical Textile Segment

According to the Ministry of Textiles, technical textiles are an important part of the

textile industry. The Working Group for the Eleventh Five Year Plan (2007-12) has

estimated the market size of technical textiles to increase from US$ 5.29 billion in

2006-07 to US$ 10.6 billion in 2011-12, without any regulatory framework and to US$

15.16 billion with regulatory framework. The Scheme for Growth and Development of

Technical Textiles aims to promote indigenous manufacture of technical textile to

leverage global opportunities and cater to the domestic demand.

Further, the government is set to launch US$ 44.21 million mission for promotion of

technical textiles, while the Finance Ministry has cleared setting up of four new

research centres for the industry, which include products like mosquito and fishing

nets, shoe laces and medical gloves.

As per a joint study of the Ministry of Textiles and an industry body, the global

technical industry is estimated at US$ 127 billion and its size in India is pegged at

US$ 11 billion.

Government Initiative

According to the Ministry of Textiles, investment under the Technology Upgradation

Fund Schemes (TUFS) has been increasing steadily. During 2010-11 (upto June 2010,

provision figures), 256 applications have been sanctioned at a project cost of US$ 89.2

million. The cumulative progress as on June 30, 2010, includes 28,302 applications

sanctioned at a project cost of US$ 46.71 billion.

The Ministry of Textile has sanctioned a total of US$ 133 million under TUFS during

September 2010.

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The Scheme for Integrated Textile Park (SITP) was approved in July 2005 to facilitate

setting up of textiles parks with world class infrastructure facilities. Forty parks have

been sanctioned till December 31, 2010 in nine states with total project cost of about

US$ 931.1 million with Government contribution of US$ 320 million. When fully

functional the parks would have an investment of US$ 4.3 billion.

Further, 100 per cent foreign direct investment (FDI) is allowed in the textile sector

under the automatic route.

The Government has launched the Integrated Skill Development Scheme for the

Textiles & Apparel Sector, including Jute & Handicrafts, with an objective of capacity

building of Institutions providing skill development & training in Textiles Sector.

Under this Scheme, the Government has envisaged skill development of 2.7 million

persons with an overall cost of US$ 530 million over the next five years.

Investments

The textiles industry has attracted FDI worth US$ 934.04 million between April

2000 and January 2011, according to data released by the Department of

Industrial Policy and Promotion (DIPP).

As part of its strategy of innovative denim products, Arvind Ltd has tied up with

Birla Cellulose to exclusively produce excel denim fabric. The company expects

excel denim to do business worth US$ 50 million in the next two years.

Textiles maker and retailer Raymond plans to invest US$ 5.6 million to US$ 6.7

million in 2011-12 to expand its accessories business and add sunglasses to its

range, said Gautam Singhania, chairman and managing director of the

company.

Technical textile manufacturer SRF Ltd plans to invest US$ 14.9 million on

expansion projects, which includes a new plant in South Africa and another in

Gujarat.

NSL Textiles has set up a textile processing facility at Chandolu near Guntur,

Andhra Pradesh with an investment of US$ 64.23 million.

TT Ltd, an integrated textile and knitwear manufacturing and exporter, plans to

invest US$ 33.46 million to enhance its yarn making capacity and retail

venture.

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Textiles Company, Alok Industries will be investing US$ 193.46 million over the

next two years to increase capacity across its product portfolio. The amount

would be spread equally for the two-year period with an investment of US$

96.73 million being made each year.

The Road Ahead

The Synthetic and Rayon Textile Export Promotion Council (SRTEPC) has set a target

to more than double the export of man-made textile from the country. Presently, the

global man-made fibre (MMF) trade accounts for 60 per cent of the total trade in

textiles. SRTEPC plans to increase exports to US$ 6.2 billion by capturing four per

cent market share by 2011-12, as per G K Gupta, Chairman, SRTEPC.

With an increased focus on catering to the domestic market, the denim industry is

India expects the production capacity to rise by 100 million metres by 2011. According

to the Textile Association of India (TAI), the denim manufacturing capacity, which

stands at 600-650 million metres per annum, is set to witness an addition by another

100 million metres wherein 70 per cent focus will be on the domestic market.

_______________ ____ _________________________ 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 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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