Kitex Garments zooms 45% in three days post Q4 results

Kitex Garments is locked in upper circuit of 20% at Rs 796, also its record high on the National Exchange (NSE), on back of heavy volumes.

The trading volumes on the counter surged an over six-fold with a combined 1.79 million shares changed till 1406 hours and there are pending buy orders for 45,340 shares on the NSE and BSE.

In past three trading sessions, shares of garment manufacturer zoomed 45% from Rs 545 on April 1, 2015, after reported nearly 100% year-on-year (YoY) jumped in its net profit at Rs 41.63 crore for the fourth quarter ended March 2015 (Q4). The company had profit of Rs 21.08 crore in the year-ago quarter.

EBITDA margins stood at 41.7% in Q4FY15 as compared to 29.3% in Q4FY14 an expansion of 13% YoY completely driven by improvement in gross margins and higher revenue contribution from garments division.

Analysts at Motilal Oswal Securities maintain ‘buy’ rating on the stock with a target price of Rs 850.

“With foray into the brands business, we expect strong 23% revenue CAGR (compound annual growth rate) along with 400bp margin expansion, driving 37% profit after tax CAGR over FY15-17,” analyst said in results update.

We expect KTG to capture a larger pie of the infant-wear value chain through its forward integration with its launch of own brand in the US market as well as licensing of private labels in the US market, added report.