1 P a g e. Surbhi Lohia Vikash Kandoi Page 1

Transcription

1 1 P a g e Surbhi Lohia surbhi@dynamiclevels.com Vikash Kandoi vikash@dynamiclevels.com Page 1

2 Himatsingka Seide Ltd - Reap the reward of CAPEX Company Overview 3 Company s Milestone and Stock price....4 Product Overview...5 Retail and Distribution... 8 Textile Outlook Industry Company Financials...12 Peer Comparison Company s Future Outlook Capex Plan of the Company Investment Rationale Page 2

3 Company s Overview The Himatsingka Group focuses on the manufacturing, retailing and distribution of Home Textile products. The Group operates with the largest capacities in the world for producing upholstery fabrics, drapery fabrics and bed linen products. The Company has its wings across Asia, Europe and North America. Its retail and wholesale distribution divisions carry some of the most prestigious brands in the Home Textile space. Himatsingka Group, founded in 1985, focuses on design and product development, best-in-class manufacturing processes and efficient supply chain capabilities. The company ensures the highest level of customer service in the industry. It has a team of over 5000 people. The Group continues to expand its reach and build capacities in the Home Textile space. Himatsingka Group is integrated from manufacturing in India to retail and distribution networks across North America, Europe and Asia. The Company s retail and distribution networks cater to over 8000 points of sale including 200 shop-in-shops of its licensed brands in major departmental stores and 25 exclusive retail stores. An integrated model and supply chain expertise enables the Group to service retail and distribution networks across 22 countries. North America In North & South America, company operates through 1. DWI Holdings 2. Divatex. DWI Holdings is the licensee of brands such as 1. Calvin Klein Home 2. Barbara Barry Divatex is the licensee of Esprit and caters to Private Label programs of major retailers. Europe In Europe, the Group operates through Guiseppe Bellora S.P.A. Bellora is amongst the most recognized Italian luxury-bedding brand and has broad distribution reach across Italy and other parts of Western Europe. Asia In Asia, the Group operates through Himatsingka Wovens. This division controls the Atmosphere brand and has retail networks in India, the Middle East and South East Asia. COMPANY PROFILE OF HIMATSINGKA, NSE, INDIA Date of Incorporation 23-Jan-1985 Date of Listing Name Dilip J Thakkar K R S Murthy Berjis M Desai Rajiv Khaitan Aditya Himatsingka Shrikant Himatsingka Jayshree Poddar D K Himatsingka A K Himatsingka Geographic Segments in INR (2015) Management 10-Jan-1995 Designation Chairman Director Director Director Executive Director Executive Director Executive Director Managing Director Vice Chairman Registered Office Address No. 10/24 Kumara Krupa Road,High Grounds (Near Sindhi High School),560001,Bengaluru,Karnataka,India Website Sales (M) % Revenue USA % Europe % Others % Reconciliation % India % Total Sales % Geographic Segment USA Europe Others Page 3

4 Company s Milestone & Stock Price 1985: Himatsinka Seide Ltd incorporated 1986: Launched IPO 1998: Expansion of weaving capacity - Stock Price ranged between Rs. 11 to : India's first luxury home furnishing brand 'Atmosphere' is launched- Stock Price ranged between Rs. 23 to : Construction of the vertically integrated Greenfield Bed Linen manufacturing facility at the Hassan SEZ, Karnataka, India commences. Stock Price ranged between Rs. 96 to : Acquisition of Giuseppe Bellora S.p.A (Italy) bed linen brands in Europe. Acquisition of Divatex Home Fashions, Inc., the acquisition of DWI Holdings, Inc., a leading branded Home Textile player in the North American market and a licensee of the Calvin Klein Home and Barbara Barry brands. Stock Price fell from Rs. 150 to : Retail supply chain center at Doddaballapur, Karnataka, India goes on stream. 'Atmosphere' launches its first international stores in Dubai and Singapore. Stock Price fell from Rs. 135 to 24. Stock is trading at Rs made 52 week high of Rs on 6 th Jan 2016 and 52 week low of Rs on 9 th Jun Himatsingka Share Price Performance SYMBOL HIMATSINGKA Current Price Face Value 5 52 Week High (06-Jan-16) 52 Week Low (09-Jun-15) Life Time high) (30-Aug-05) Life Time low (06-Mar-09) ADM (Avg Movt) 9.87 Average Volume Month Return 12.12% P/E Ratio (x) Book Value Market Cap (Cr) Promoter pledged Nil Life time high for the stock is at Rs on 30 th Aug 2005 and life time low of Rs on 6 th Mar Stock has surged % in 1 year having a beta with index of Red Himatsingka Yellow Nifty Page 4 Source: Bloomberg

5 Product Overview Bed Linen Himatsingka is one of the largest producers of bed linen products in the world. Its vertically integrated manufacturing facility is equipped with the latest warping, sizing, weaving, continuous processing, yarn dyeing and sewing facilities. The Company has a capability to offer both piece dyed and yarn dyed products along with embroidery and quilting. Himatsingka holds a diverse position in this area. Plant Location: Hassan SEZ, Karnataka, India No. of employees: 4000 Weaving Capacity: 21 million metres per annum. Processing Capacity: 23 million metres per annum. Cut & Sew Capacity: 3.8 million sheet sets per annum. Products Offered: Complete bed ensembles including Sheet Sets, Pillowcases & Decorative Pillows Bed Linen Plant Located at Karnataka With 4000 Employees Capacity 21 Million Duvets Comforters Bed Skirts Shams and Dust Ruffles The facility also offers a wide range of quilted products. Weaves: This facility offers a wide range of weaves from basic Percale and Sateen to more complex hybrid weaves such as Dobbies Twills Matelesse and Jacquards. Finishing: Products are offered with a variety of handle and finishes such as Soft Products a. Sheet Sets b. Pillowcase c. Duvets d. Comforters e. Decorative Pillow f. Bedskrits g. Shams h. Dust Ruffles Wrinkle-free Antibacterial Water Repellent and Stain Resistant Page 5

6 Cut & Sew: The cut & sew facility is equipped with automatic cutting machines and has the largest installation of ETON conveyer systems for bedding products in India. Design Capabilities: The Group's design studios offers a variety of fabric and hem treatments along with embellishments like embroidery of logos, insignias and crystals. The design team continuously strives to create fresh, functional and appealing bedding components. Embroidery treatments add flavor to the fashion bedding products. Fibre Specifications: Finest cotton yarns such as Supima Egyptian Drapery & Upholstery Plant Located at Karnataka Seasell blends and Indian cotton Drapery & Upholstery The Drapery and Upholstery fabrics manufacturing facility is one of the largest of its kind in India and in the world. The operation is vertically integrated from pre-weaving yarn preparation to postweaving finishing processes. The facility was built with a vision to produce Drapery and Upholstery products that epitomize cutting edge design and quality. Over the years, products have become most recognized brands in the world. Plant Location: Doddaballapur, Karnataka, India No. of employees: 700 Capacity: The facility has an installed capacity of 2.2 million metres per annum. Products Offered: Fabrics for Drapery and Upholstery applications. Product Type: The facility manufactures a wide range of fabrics from ultra lightweight sheers to heavy velvets in a variety of weaves from simple Dobbies to very complex Jacquards. This facility is equipped to weave fabrics on high-density warps with a repeat size of up to 140 cms. Design Capabilities: The Group's design studios in New York, Milan and Bangalore have over the years created an archive of over products. The teams add 1500 new products every year. Customers have the flexibility to choose from the existing product archives or provide customized requirements. 700 Employees Capacity 2.2 million meters p.a Product: Complex Jacqards Page 6

7 Processing & Finishing: Abrasion Resistance Knit Backing Stain Resistant Flame Retardancy Silk Blended Yarns Fibre Specifications: Fibres like Silk, Cotton, Linen, Acrylic, Wool, Polyester and Viscose are used to produce an assortment of fine Drapery and Upholstery fabrics suitable for both residential and institutional applications. Quality Certifications: This facility is certified for ISO 9002 and has recently acquired certification for ISO which ensures that the production of fabrics has no harmful effect on the environment. Plant Located at Karnataka Silk & Blended Yarn The Spun Silk facility at Himatsingka manufactures 100% Spun Silk yarn as well as Silk yarns blended with Wool, Tussar & Linen. This division predominantly caters to the requirements of the Drapery and Upholstery manufacturing division and also selectively caters to clientele who require high quality Spun Silk and blended yarns. Plant Location: Doddaballapur, Karnataka, India No. of employees: 80 Located at Karnataka Capacity 200 MT p.a Capacity: The facility has an installed capacity of 200 MT per annum. Product Type: A wide variety of yarns singles and twisted, are produced at this facility. Plain and fancy yarns suitable for weaving as well as for flat bed and circular knitting are produced here. Regular, Gassed and Shantung qualities are offered from this facility. Product: Single and Twisted Yarn Products Offered: Spun Silk Silk Blended Silk Blended with Linen Silk Blended with Tusaar Page 7

8 Retail and Distribution North America DWI Holdings, a subsidiary of Himatsingka, is focused in operating in the branded Home Textile space. DWI Holdings has exclusive licenses for the sourcing, marketing and distribution of luxury home textile brands Himatsingka Seide Ltd at North America Calvin Klein Home Barbara Barry Bellora Hospitality These brands are amongst the most prestigious and recognized home textile labels in the North American market. Calvin Klein Home is the second largest luxury bedding brand distributed through department stores in the United States. The DWI product line includes Sheets Operating Branded Textile DDWI Holding Textile Distribution Divatex Pillowcases Duvet Covers Bed Skirts, Pillow Shams Decorative Pillows Calvin Klein Home Barbara Barry In addition the product line includes home accessories as well as Blankets, Throws, Towels, Bathrobes, Turndown Mats and Bath Rugs. DWI is equipped with state-of-the-art warehousing and supply chain capabilities to ensure the highest standards of service for its customers. Divatex Bellora Hospitality Divatex, a subsidiary of Himatsingka, is amongst the largest Home Textile distribution companies in North America. Divatex sources and distributes a wide range of products from Sheets and Pillowcases in cotton, polycotton, microfiber and other blends to Top-of-Bed products, Duvets, Shams, Comforters, Decorative Pillows, Bed Skirts, Coverlets, Quilts, Throws, Blankets and more. Divatex is committed to its customers, and services them through major Specialty Home Stores, Department Stores, Warehouse Clubs and Catalogues. Page 8

9 Europe Giuseppe Bellora S.P.A Bellora, a subsidiary of Himatsingka, is amongst the most recognized luxury bedding brands in Italy. Founded in 1883, the brand epitomizes heritage and tradition. The brand retails through 35 exclusive Bellora stores, multi-brand outlets and luxury departmental stores in Italy and other parts of Western Europe. Its product lines include Fine bedding, Himatsingka Seide LTD Bath Allied home accessories The design and product development capabilities of Bellora give its products a unique presence across markets. India / Asia Himatsingka Wovens A global luxury home textile brand, Atmosphere is designed for the discerning. The brand offers an exclusive collection of luxury products like Europe Bellora India / Asia Atmosphere Drapery Upholstery Bed Linen Its products are tailored to comply with both residential and institutional applications. A large part of the Atmosphere collection has been conceived and developed at the design studios of Himatsingka. Its emphasis on evolved aesthetic and superior quality enables the manufacture of finest fabrics in the world. Atmosphere has 9 exclusive stores across India and U.A.E. Of its 9 stores, 8 are located in India across 7 cities with 1 store in Dubai. 35 Stores 9 Stores Page 9

10 Textile Industry Outlook Why textile Industry is a priority sector in India India s textiles sector is one of the oldest industries in Indian economy. Textiles sector is among the largest contributors to India s exports with around 11 per cent of total exports. The textiles industry is also labour intensive and is one of the largest employers. The industry has export earnings of worth US$ 41.4 billion in , a growth of 5.4 per cent, as per The Cotton Textiles Export Promotion Council (Texprocil). The industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. The Indian Textile Industry contributes approximately 5 per cent to India s gross domestic product (GDP) The Industry contributes 14 per cent to overall Index of Industrial Production (IIP). Export earnings is of worth US$41.4 billion in Provide employment to 45 million people directly & 60 million people indirectly The textile industry caters both organized and unorganized segment. Unorganised sector consists of: Handloom Contribute 5% to GDP Handicrafts Sericulture, These are operated on a small scale and through traditional tools and methods. Contribute 14% to IIP Organised Sector consists of: Spinning Apparel and Garments segment This applies modern machinery and techniques such as economies of scale. Page 10

11 Expectations and Achievements of Textile Industry The Indian textiles industry, currently estimated at around US$ 108 billion, is expected to reach US$ 223 billion by 2021 The Indian textile industry has the potential to reach US$ 500 billion in size according to a study by Wazir Advisors and PCI Xylenes & Polyester. The textiles sector has experienced a spurt in investment in last five years. The effect is seen in stock price which has given multiple returns to the investors. Foreign Direct Investment (FDI) worth US$ 1.77 billion during April 2000 to September 2015 has been attracted. Indian Textile Industry is expected to reach US$ 223 billion by 2021 Government initiatives on Textile industry Narendra Modi led Government wanted to create job for both skilled and unskilled labour to fulfill his promise post budget. This sector has potential to generate employment and at the same time can help in boosting Indian economy. Government has taken lots of initiatives in this direction. It has allowed 100 per cent FDI in the Indian textiles sector under the automatic route. Government has promoted India Handloom on social media to connect to people outside India. The Ministry of Textiles invested Rs 200 crore in Technology Mission on Technical Textiles (TMTT). The objective of TMTT is to develop world class testing facilities at eight Centres of Excellence across India. The Government will soon announce a new National Textiles Policy. With the help of this new policy government expects to create 35 million new jobs by attracting investments from foreign companies, as per Textiles Secretary Mr. S K Panda. The Government of India provides aid for creation of infrastructure in the parks to the extent of 40 per cent with a limit up to Rs 40 crore (US$ 6 million). The major machinery for production of technical textiles receives a concessional customs duty list of 5 per cent. The government has also proposed to extend 24/7 customs clearance facility at 13 airports and 14 sea ports resulting in faster clearance of import and export cargo. Page 11

12 Company Financials Analysis of Profit Statement of Profit Dec-15 Mar-15 Mar-14 Mar-13 In Cr 3 Quarter Cumulative Annual Annual Annual Revenue Operating Profit Other Income Interest P/L Before Tax Tax PAT EPS (Rs.) % Growth Particulars FY 2015 to FY FY 2014 to FY FY 2013 to FY 2016* Revenue % -4.32% 20.05% Operating Profit 10.33% 19.15% 34.91% Other Income % 43.23% % Interest % 6.78% 22.07% P/L Before Tax 37.39% 44.24% 22.56% PAT 31.20% 73.39% 2.93% EPS (Rs.) 29.93% 50.70% 10.48% In last 3 Quarter ( ) company has made sales of Rs Crs. vs Rs Crs last year and has an average quarterly sale of Rs. 485 Cr. So if the company s post sales for March Quarter of 2016 is in same line, then annual sale should stand at Rs crs. i.e. annual sales would be at par with that of March 2015 annual sales. However, company has already beat its last year s profitability in 3 quarters and the EPS for three quarter stands at VS 9.69 growth of 29.93%. Interest cost has fallen by 22.83%. Net Debt is 780 Crores. Segment wise revenue % of STO Sheet Sets - Bed Linen Fabrics Bed Linen - Traded Power Yarns Fabrics - Bed Linen Segment wise revenue Product Name % of STO Sheet Sets - Bed Linen Fabrics Bed Linen - Traded 3.27 Power 2.18 Yarns 1.14 Fabrics - Bed Linen 0.96 Page 12

13 Analysis of cost Analysis of Cost 15-Dec 15-Mar 14-Mar 13-Mar In Cr 3 Quarter cumulative Annual Annual Annual Consumption of Raw Materials Purchase of Traded Goods Employees Cost Depreciation Other Expenses Total Expenditure % Movement In Cost In Cr FY 2015 to FY 2014 to FY 2013 to FY 2016* FY 2015 FY 2014 Consumption of Raw % % % Materials Purchase of Traded % 36.97% % Goods Employees Cost % -3.35% 16.48% Other Expenses % -9.57% 20.08% Total Expenditure % -6.10% 19.06% From above table it is clear that the company has been able to lower down its cost i.e. the company is performing with cost efficiency and overhead cost well managed year on year. We can see from above table that the company s topline is consistent Year on Year, but by well managed cost and economies of scale, the company is able to grow on bottom line. Page 13

14 Balance Sheet Himatsingka seide Limited As at March 31, 2015 Page 14

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17 Peer Comparison Price & Volume Comparison INSTRUMENT Price Avg. Market Cap Volume (Rs. in Cr) HIMATSINGKA WELSPUN INDIA SRF ARVIND INDO COUNT KPR MILL TRIDENT Ratio Analysis Current Ratio (x) 1.8 Quick Ratio (x) 0.59 Dividend Yield (%) 0.94 Interest Coverage Ratio (x) 2.59 Debt Equity Ratio (x) 0.83 Return On Asset (%) 7.61 Return On Equity (%) Above comparison shows that average Market cap of the industry is 2500cr (removing extremes) and Himatsingka Seide has Market cap of 2090 and average volume is 2 lakhs which means company has good market liquidity. FII Holding & Ratio Comparison INSTRUMENT % FII P/E Ratio Debt Equity Holding (X) Ratio (X) HIMATSINGKA WELSPUN INDIA SRF ARVIND INDO COUNT KPR MILL TRIDENT Industry PE of textile sector is at and standard Debt Equity ratio should be below 2. This suggests that comparing to Industry PE stock is still trading at a lower level. Financial Comparison INSTRUMENT Annual Sales Operating Net Profit Mar 15 Profit in Cr in Cr HIMATSINGKA WELSPUN INDIA SRF ARVIND INDO COUNT KPR MILL TRIDENT Page 17

18 Profitable Comparison INSTRUMENT Net Profit Equity in FV in Cr Cr EPS HIMATSINGKA WELSPUN INDIA SRF ARVIND INDO COUNT KPR MILL TRIDENT Price Performance Comparison INSTRUMENT 1M 3M 6M 1Y Movt Post Budget HIMATSINGKA 7% 6% -4% 153% 38% SRF 15% 26% 6% 25% 32% KPR MILL 9% 16% 10% 46% 31% INDO COUNT 13% 5% 14% 138% 28% KITEX 8% -19% -46% -39% 23% TRIDENT -1% 19% 11% 117% 21% WELSPUN INDIA 1% 23% 25% 134% 14% ARVIND -2% -11% -7% 3% 6% Share Price Performance in INR Price Week High Week Low Wk Beta M Return 7.2% 6M Return -4.2% 52 Wk Return 152.8% Post budget* Himatsingka seide has been a top performer in textile sector with return of 38%. (*Budget was announced on 29 th Feb 2016). Dividend History Announcement Date Ex-Date Amount Interim/Final 11-Mar Mar-16 1 Interim 25-May-15 4-Sep-15 2 Final 15-May-14 8-Sep Final 27-May Jul-13 1 Final 26-May-12 9-Aug Final 31-May Aug Final 5-Mar Mar Interim 9-Oct-06 2-Nov Interim 31-May Jul Final Page 18

19 Date High Price Last 2 Week Delivery Position Total Low Traded Price Qty Deliverable Qty Delivery % Qty 4-Apr % 5-Apr % 6-Apr % 7-Apr % 8-Apr % 11-Apr % 12-Apr % 13-Apr % 18-Apr % Highest deliverable quantity was seen at to levels on 12 th April 2016 and at to with deliverable quantity of 1.09 lakhs shares and 4.32 lakhs shares respectively. So 190 level can be a good base for the stock. Top Large Deals Date Exchange Quantity Price Value(Cr) Time 21-Mar-16 NSE :58 Shareholding Pattern Mar-16 Dec-15 Sep-15 Jun-15 Promoter & Promoter Group (%) Indian Foreign Institutions (%) FII DII Non Institutions (%) Bodies Corporate 3.76 NIL Others Custodians NIL NIL NIL NIL No. of shares (cr.) Page 19

20 Company s Future Outlook - by Management: Shrikant Himatsingka Executive director 1. Company is operating about brands and aspire to achieve about Rs 1200 crore in revenue from brands in the next two-three years. 2. North America is largest market so company has a large position in that geography across the United States, Canada and Mexico. 3. Shrikant expect some softness in demand in the European geographies and the Indonesian areas where they are present. So, North America is the geography that will sort of lead the growth for them. 4. Company s manufacturing performance has been extremely strong and they see the underlying buoyancy to continue as far as manufacturing is concerned. 5. Both plants perform reasonably well and in FY 2017 as stated earlier they are scheduled to commission new sheeting capacities by June 2016 for which they are running on schedule, so next year is also going to see some incremental capacities that will come their way which would give further boost to company s manufacturing performance. 6. Debt number of the company is 878 Crores gross 780 Crores net 98 cash and cash equivalents. 7. Larger benefits were expected in FY 2016 but company admits that they are seeing some delays in some of the initiatives that they have taken. They have some delays in it bearing fruit so they see the greater impact of these initiatives coming through in FY Company expects stable state for retail and distribution business that should throw up EBITDAs in the region of 6%, to 7%. 9. More than Channels Company is more focused on building mid and large size client basis and that is why they are exiting micro clients as far as their business complexion is concerned on the bedding side and bath side of the business that has because some soften in revenue. They see it stabilize going into Q1 at this point and they see the uptick begin possibly in Q2 FY Greater impact of initiatives will be seen in FY Expected EBITDAs in the region of 6%, to 7%. Company is focusing on mid and large size clients Page 20

21 Capex Plan of the company 1. The cumulative Capex Plan that has been planned by the company, stands at 1281 Crores across three projects which is sheeting project, spinning project and the terry towel project. 2. The company has indicated earlier that the timeframe for these projects will be over in the next three years. Of these three projects, the company has commenced work on the expansion of its current sheeting plant, the capacity of which will be enhanced from 23 million meters per annum to 46 million meters per annum. 3. The schedule date of commissioning of this expansion currently stands for June 2016 this project entails an investment of just over 200 Crores. 4. The total investment that the company foresees in its spinning plant will stand at just over 600 Crores and the total investment in the terry towel facility will stand at just over 400 Crores. 5. Himatsingka plans to set up a total capacity of spindles, for which construction has not commenced yet. Capex Plan planned stands at 1281 Cr. Project will be over in next 3 years 23 million meters will enhanced to 46million meters p.a. Spinning & Terry towel plants will start in next quarter Page 21

22 Investment Rationale Increasing manufacturing capacity & backward integration will lead to growth in margin. With a long-term focus on sustainable and profitable growth, Himatsinka Seide Ltd has earmarked a capacity expansion plan of Rs.1281cr. to expand company s manufacturing capacity. The investments entail an increase in its current bed linen capacity, backward integration into spinning and foray into terry towels. The company s stock price is trading below industry PE of 20. The company has planned a Capital Expenditure of Rs.600cr. for backward integration into spinning with a capacity of 211,584 Spindles, for captive purpose which can cater to existing bed linen capacity. Spinning plant is expected to start operation by FY18. The backward integration process is expected to be margin accretive with improving operational flexibility, execution consistency and quality standards. The company plans to foray into Terry towels manufacturing with a capacity of 25,000 TN per annum with a CapEX of Rs.450cr. Terry towel plant is expected to generate revenue from FY19. Himatsinka Seide Ltd is a Multibagger Stock recommended by Dynamic Levels. Data source: Bloomberg, BSE India, NSE India Page 22

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