Stocks To Buy:1 Textile Company Stock To Buy For 28% Upside: ICICI Direct

Indices in trade on February 10, 2022 have climbed higher after the RBI in its last monetary policy for the ongoing fiscal year maintains status quo. All of the sectoral indices have also been trading higher with Nifty Bank up close to 1.5% or above 500 points.

Meanwhile, brokerage firm ICICI Direct has given a 'Buy' call on the stock below for substantial upside potential.

Buy KPR Mill: For a target price of Rs. 820

For the textile company, the brokerage has given a target of Rs. 820 and at the current share price of Rs.641, this means a potential upside of 28%.

Company’s Q3Fy22 performance:

The readymade apparel has posted a steady quarter owing to strong yarn spreads as well as strong order book for the garmenting division. On a sequential basis, gross margins fell to 43.8% as the company carried low cost cotton inventory. The company in the period under review

commissioned its garmenting facility (42 million pieces) and has a robust order book of Rs. 1000 crore . Revenue at the company logged 36% YoY growth.

Investment rationale for KPR Mill:

The brokerage bets on the stock as it considers it to be a play in the apparel export segment. The company values KPR at Rs 820 i.e. 29x FY24E EPS. The brokerage lists out the following rationales including:

2 main capex projects totalling to Rs. 750 crore towards garmenting as well as another for ethanol shall be scaled up in the next fiscal. Capital deployment towards value accretive projects shall be positive for the company. Also, US market opportunities also provide for strong visibility for sustained growth in exports. "We model revenue and earnings CAGR of 19%, 24%, respectively, in FY21-24E with higher RoE of 24%", adds the brokerage.

Disclaimer:

The above stock is taken from the brokerage report of ICICI Direct. Readers and investors need to be cautious as stock market investing poses financial loss risk.

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