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NITIN SPINNERS LIMITED ‘Buy
Add On Dips,
Shareholding Pattern Particulars Dec’17 Sept’17 June'17 Promoter 53.4% 64.3% 64.3% FPIs 1.5% 0.9 0.9 Insti. 12.6% 0.0 0.1 N. Insti. 32.5% 34.8 34.7
Relative Capital Market Strength
• Nitin Spinners Limited(NSL) is engaged in textile business situated in Bhilwara, Rajasthan, wherein, the company manufactures cotton yarn and cotton knitted fabric.
• The Company manufactures a range of yarns, including open end yarns, multifold open end yarns, ring spun combed yarns, multifold ring spun yarns, compact yarns, fancy slub yarns, core spun yarns, S and Z twist yarns, dyeable cheese cones and organic cotton yarns and blends.
• The Company offers fabrics in greige form in tubular and open width. Its product range in knitted fabrics include single jersey, pique structures, interlock structures, rib structures and three thread fleece
• The Company's products are applicable in manufacturing products, such as apparel and garments, under garments, terry towels, woven fabrics, home furnishings, carpets, denim, industrial textiles, medical textiles, mattresses stickings and socks, among others.
• The overall product range of NSL includes production of value added yarn, fabrics, yarn and others.
NITIN SPINNERS LIMITED
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Rating Matrix
CMP Rs.111.0
Rating Buy, Add on dips.
Holding Period 12 to 18months
Current Level Investment
52 week H/L Rs.145/76
Face value Rs10
Sector Textile
Category Small Cap
F&O Stock No
Source: Choice Research/ Annual reports; Financial data-Ace equity
Financial Snapshot:
Particulars (Rs. Mn) FY15 FY16 FY17 FY18E FY19E Revenue from operations 6164.7 7668.6 9333.7 - - EBITDA (Excl OI) 911.7 1370.2 1331.2 - - EBITDA Margin (%) 16.1% 17.9% 14.3% - PAT 409.5 441.6 571.5 - - NPM (%) 6.6% 5.8% 6.1% - - ROCE (%) 13.8% 19.3% 12.1% - - ROE (%) 24.5% 21.5% 22.3% - - P/E 3.4 6.1 10.0 - - EPS 8.9 9.6 12.5 - - EV/EBITDA 4.5 4.5 8.3 - - P/BV 0.8 1.3 2.1 - -
Company Synopsis: • The spinning capacity of NSL was increased from 1,50,096 spindles to 2,23,056
spindles, which resulted in the company’s cotton yarn manufacturing to increase from 38,000TPA to 50,000TPA. 14 machines were added in the knitting division resulting into a total of 63 machines and a production capacity of 9000TPA.
• NSL has a domestic as well as international clientele which include companies such as Raymonds, D’Décor, Birla Century, Pacific Group, Paramount Group, Eminence France etc.
• NSL exports to over 40 countries across all the continents. The exports turnover increased by 11.28% in FY17. NSL earned Rs.9,202.5mn from sales in FY17.
Outlook: • As of June 2017, the Central Government had planned to finalize and launch the
new textile policy in the comming months. The policy aims to achieve US$ 300 billion worth of textile exports by 2024-25 and create an additional 35mn jobs.
• The size of India’s textile market in 2016 was around US$ 137 billion, which is expected to touch US$ 226 billion market by 2023, growing at a CAGR of 8.7%.
• The change in the shareholding pattern of the company, with respect to the number of shares held by external institutions, reflects a positive change, showing external interests and confidence of institutions in the future of the company.
• The expansion of production capacity of NSL, could help the company to improve the production quality and quantity, ultimately leading to an increase in revenue.
• The clientele of NSL also depicts a possibility of geographic and demographic expansion in the future.
• NSL’s focus on increased production of value added yarn, which has more demand as compared to basic yarn, could help the company to improve quality and generate revenue in the future.
Valuation: We expect that the company will have an impetus leading to strong growth in the medium to long term. The company is expected to have a 30-35% growth in 12 to 18 months. Thus, on our valuation front, at CMP of Rs.111.0, the company is trading at a P/E multiple of 9.7x and EV/EBITDA multiple of 6.6x, which is at a discount as compared to the industry P/E and industry EV/EBITDA of multiple of 14.0x and 10.0x respectively. After considering all these factors and high probability of strong growth in the future we recommend a” buy, add on dips“ rating on this stock.
Particular (Rs. Mn)
Q2FY18 Q2FY17 Change (YoY)
Total Revenue 2844.4 2064.7 37.8%
EBITDA (Excl OI) 334.8 316.9 5.6%
EBITDA Margin (%)
11.8% 15.3% (2330) Bps
PAT 83.0 141.1 -41.2%
NPM (%) 2.9% 6.8% (5730) bps
Quarterly Snapshot:
0.95
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1.25
1.35
1.45
1.55
1.65
1.75
1.85
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Nitin Spinners Limited
18-Jan-2018
63.37
36.63
Revenue from exports
Revenue from domestic sales
Revenue Segmentation
2 Source: Choice Research/ Annual reports; Financial data-Ace equity
Particulars (Rs. Mn) FY13 FY14 FY15 FY16 FY17 Revenue from operations 4,460.5 4,883.4 6,164.7 7,668.6 9,333.7 Gr (%) - 9.5% 26.2% 24.4% 21.7% EBITDA (Excl OI) 872.0 939.3 991.7 1,370.2 1,331.2 EBITDA Margin (%) 19.5% 19.2% 16.1% 17.9% 14.3% PAT 141.3 347.8 409.5 441.6 571.5 NPM (%) 3.2% 7.1% 6.6% 5.8% 6.1% Net Worth 1,007.9 1,315.5 1,669.9 2,056.4 2,561.7 Total Assets 3,457.2 3,539.8 6,098.9 6,350.3 9,234.5 Debt 1,791.7 1,441.2 3,475.7 2,986.2 4,968.6 Cash flow from Operations 888.9 866.2 445.0 1,003.9 591.5 D/E (x) 1.8 1.1 2.1 1.5 1.9 Current Ratio (x) 1.7 1.8 1.5 1.5 1.2 Profitablity ratios (%) ROCE (%) 22.4% 25.1% 13.8% 19.3% 12.1% ROE (%) 14.0% 26.4% 24.5% 21.5% 22.3% ROA (%) 4.09% 9.83% 6.71% 6.95% 6.19% Efficiency ratios (x) Receivable days 19.0 19.8 19.3 19.0 17.1 Inventory days 65.1 57.0 48.8 49.7 55.7 Payable days 4.5 6.9 6.7 6.2 6.6
Peer Comparison:
Financial Snapshot:
Companies CMP ROE (TTM) 12MR(%) M. Cap
(Rs. Mn) EPS
(TTM) BVPS
EBIDTA Margin (%)
NPM (%)
Ambika Cotton Mills Ltd. 1570.0 14.5% 51.1 8980.4 100.6 694.1 19.8% 10.7%
Loyal Textile Mills Ltd. 769.9 12.6% 5.3 3710.9 46.7 369.6 11.0% 2.1%
Nitin Spinners Ltd. 111.0 18.8% 44.7 5037.2 11.3 60.1 13.2% 4.7%
Sarla Performance Fibers Ltd. 65.5 11.8% 1.9 5469.3 4.3 35.9 13.3% 11.7%
Vardhaman Textiles Ltd. 1451.1 13.9% 32.5 80724.7 113.5 816.9 17.3% 10.2%
Average 793.3 14.3% 26.3 20784.5 55.3 395.3 14.9% 7.9%
Companies P/E (x) P/Bv (x) P/Sales(x
) EV/EBIDTA
(x) D/E
PAT(Rs. Mn) (TTM)
EBIDTA(Rs. Mn) (TTM)
Sales (Rs. Mn) (TTM)
Ambika Cotton Mills Ltd. 15.6 2.3 1.7 8.3 0.0 575.5 1,068.5 5,392.3
Loyal Textile Mills Ltd. 16.5 2.1 0.3 7.2 2.9 225.3 1,198.9 10,869.8
Nitin Spinners Ltd. 9.7 1.8 0.5 6.6 1.6 519.2 1,458.1 11,050.7
Sarla Performance Fibers Ltd. 15.4 1.8 1.8 18.5 0.7 355.5 403.3 3,041.8
Vardhaman Textiles Ltd. 12.8 1.8 1.3 9.3 0.4 6,311.4 10,642.2 61,626.3
Average 14.0 2.0 1.1 10.0 1.1 1,597.4 2,954.2 18,396.2
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Quarterly Results Update: During Q2FY18, the operating income increased from Rs.2064.7mn in Q2FY17 to Rs.2844.4mn in Q2FY18, with a 37.8% increase in YoY basis. The EBITDA increased from Rs.316.9mn in Q2FY17 to Rs.334.8mn in Q2FY18, with a 5.6% increase in YoY basis. PAT decreased from Rs.141.1mn in Q2FY17 to Rs.83mn in Q2FY18. The reason for the slight increase in EBITDA as compared to the previous quarters is due to the increase in the spinning capacity of the company. Expansion Of Spinning Capacity: The spinning capacity of the company was increased from 1,50,096 to 2,23,056, which resulted in the company’s cotton yarn manufacturing to increase from 38,000TPA to 50,000TPA. 14 machines were added in the knitting division resulting into a total of 63 machines and a production capacity of 9000TPA. Graphs Showing Increase of spindles and knitted fabric Increase In Production of Yarn over the last 5 financial years: The above expansion in capacity led to an increase in production of yarn and knitted fabric to 50,000TPA and 9000TPA respectively. The expansion also included increase in the number of rotors to 2936. The expansions could help NSL to commence the commercial production within their targeted dates.
Graph Showing Increase in production of Knitted Fabric: (Units TPA) Product Segmentation and % of revenues earned: Increase In Production Of Value Added Yarn: • The production of value added yarn as compared to
FY16 has increased by 10% which includes production of slub yarn, compact yarn, core spun yarn, organic yarn and BCI/TBC certified yarns, which command premium over basic yarn.
• As the demand of value added yarn is more than that of the basic yarn, the increasing focus on the value added yarns could help the company to generate revenues in the future by improving quality of the product.
• NSL earned revenues of Rs.9333.7mn in FY17, which grew by 22% over FY16.
• Exports accounted to over 60% of NSL’s revenues. • Due to the increase in the production of value added
products, revenues increased from 15% in FY 2013 to 41% in FY17.
• NSL earned 63.7% of the revenue form exports and 36.3% from domestic sales
Source: Choice Research/ Annual reports; Financial data-Ace equity
0
100000
200000
300000
FY16 FY17
Spindles
0
20
40
60
80
FY16 FY17
Knitted Fabric
0
2000
4000
6000
8000
FY13 FY14 FY15 FY16 FY17
Product % in FY17
Value added yarn 24%
Fabrics 17%
Yarn 53%
Others 6%
0
10000
20000
30000
40000
50000
FY13 FY14 FY15 FY16 FY17
Graph Showing Increase In Production Of Yarn: (Units TPA)
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suggested stock.
Fundamental Research Team
Name Designation Email id Contact No.
Sunder Sanmukhani Head-Fundamental Research [email protected] 022 - 6707 9910
Satish Kumar Research Analyst [email protected] 022 - 6707 9913
Rajnath Yadav Research Analyst [email protected] 022 - 6707 9912
Aman Lamba Research Associate [email protected] 022 - 67079917
Devanshi Shah Research Associate [email protected] 022 - 67079916
Shrey Gandhi Research Associate [email protected] 022 - 67079914
Dhvanit Wadia Research Associate [email protected] 022 - 67079915
Dhruv Thakkar Research Associate [email protected] 022-67079917
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OUR TEAM
Disclaimer
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POTENTIAL CONFLICT OF INTEREST DISCLOSURE (as on date of report) Disclosure of interest statement – • Analyst interest of the stock /Instrument(s): - No. • Firm interest of the stock / Instrument (s): - No.
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