Stock of this textile company has zoomed 127% in a month

Shares of Sportking India were locked in the 5 per cent upper circuit for the ninth straight day, at Rs 4,501.95, on the BSE on Thursday

Shares of Sportking India were locked in the 5 per cent upper circuit for the ninth straight day, at Rs 4,501.95 apiece -- also its new high -- on the BSE on Thursday after the company announced bonus issue plan. The company, engaged in textile business, has seen its market price more-than-double, or up127 per cent, in the past one month as compared to a 3.4 per cent rise in the S&P BSE Sensex.

In the past six months, the stock has zoomed 465 per cent, while in one year it has skyrocketed 1,775 per cent, as against a 7.74 per cent and a 45.12 per cent surge in the benchmark index, respectively.

Sportking India on Wednesday, August 4, 2021, announced that the board of directors of the company is scheduled to meet on Saturday, August 14 to consider and recommend issuance of bonus equity shares.

Sportking India manufactures cotton, cotton polyester blended and acrylic-blended yarn in grey and dyed forms with an installed capacity of 272,880 spindles. The garments are retailed by Sportking Group companies under the Sportking and Mentor brands, through both exclusive and multi-brand stores.

For April-June quarter of the financial year 2021-22 (Q1FY22), Sportking India reported robust numbers, with net profit jumping multiple-fold at Rs 78.99 crore as against Rs 0.36 crore in the year-ago quarter. It had posted profit of Rs 45.39 crore in Q4FY21. Total income, meanwhile, more-than-doubled to Rs 452 crore from Rs 223 crore in Q1FY21. Ebitda (earnings before interest, taxes, depreciation, and amortization) margin improved 1,685 basis points (bps) YoY and 265 bps sequentially at 28.29 per cent during the quarter.

“Sportking India (SIL) continues to draw benefits of being a flagship company of the vertically integrated textile group ‘Sportking’ which has its presence throughout the value chain viz. spinning, knitting, garmenting and retailing. SIL’s large scale of operations further stabilised in the year FY21 as it commenced operations on the incremental capacity of ~68000 spindles in the end of FY19. Its diversified product portfolio, healthy capacity utilisation levels and a robust mix of domestic and export sales continues to provide strength to the ratings,” Brickwork Ratings said on July 22, 2021.

The rating agency had upgraded the ratings for the company's bank loan facilities, after factoring in the improvements in its profitability margins, led by strong demand in exports and high realisations in H2FY21.

The ratings are, however, are constrained by susceptibility of the company's margins to volatility in raw material prices in the medium term.

"Since the company generates almost 50 per cent of its revenues from exports, its profitability is also susceptible to the fluctuations in forex exchange rates. Further, there are inherent risks of the spinning business being commoditized, price-sensitive, competitive and exposed to the impacts of cyclicality. The ability of the company to improve its revenues and maintain its profitability in the long term will remain key rating monitorable," the rating agency said.

Meanwhile, currently, SIL is trading under ‘XT’ group on the BSE.  XT consists of all those stocks which are only listed on BSE and are settled on a trade-to-trade basis. There is no intra-day trading allowed for shares falling under this group as the delivery of these stocks is based on a T+2 basis.

The company has also low equity base of 3.32 million shares. Of these, promoters held 74.16 per cent stake, while the remaining 25.84 per cent holdings are with individual shareholders (22.22 per cent), non-resident Indian (2.14 per cent) and investor Amit Aggarwal (1.75 per cent), the June 30, 2021 shareholding data shows.