BUY CMP 280.10 Target Price 322.00 KDDL LTD Result Update (PARENT BASIS): Q1 FY16 AUGUST 22 nd 2015 ISIN: INE291D01011 Index Details Stock Data Sector Other Apparels & Accessories BSE Code 532054 Face Value 10.00 52wk. High / Low (Rs.) 424.50/138.80 Volume (2wk. Avg. Q.) 39000 Market Cap (Rs. in mn.) 2543.31 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY15A FY16E FY17E Net Sales 1268.40 1390.17 1501.38 EBITDA 260.00 280.50 302.33 Net Profit 65.10 74.94 85.57 EPS 7.17 8.25 9.42 P/E 39.07 33.94 29.72 Shareholding Pattern (%) As on June-15 As on March-15 PROMOTER 52.83 52.83 FIIs 0.53 0.37 DIIs 0.04 0.03 OTHERS 46.60 46.77 1 Year Comparative Graph SYNOPSIS KDDL Limited is a diverse company focusing on the business of Watches and Precision Engineering. In Q1 FY16, Net profit stood to Rs. 13.90 million against Rs. 10.50 million in the corresponding quarter of previous year, grew by 32.38%. The company s net sales stood at Rs. 302.70 million from Rs. 302.30 million over the corresponding quarter of previous year. During Q1 FY16 Operating profit is Rs. 58.40 million as against Rs. 56.10 million in the corresponding period of the previous year. The company has reported an EPS of Rs. 1.53 for the 1 st quarter as against an EPS of Rs. 1.16 in the corresponding quarter of the previous year. Profit before tax (PBT) at Rs. 21.10 million in Q1 FY16 compared to Rs. 16.10 million in Q1 FY15, registered a growth of 31.06%. The company is an Authorized retailer of over 60 luxury watch brands, ranging from Rs.5,000 to more than Rs.20,00,000. Net Sales and Operating profit of the company are expected to grow at a CAGR of 12% and 25% over 2014 to 2017E respectively. KDDL LTD BSE SENSEX PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) KDDL Ltd 280.10 2543.31 7.17 39.07 5.16 20.00 Rajesh Exports Ltd 566.90 167382.90 10.85 52.25 6.41 100.00 Acknit Industries Ltd 69.90 176.10 10.31 6.78 0.64 15.00 Goldiam International Ltd 46.60 1162.50 5.21 8.94 0.63 15.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q1 FY16, KDDL Limited is a diverse company focusing on the business of Watches and Precision Engineering has reported its financial results for the quarter ended 30 th June, 2015. Rs. In million June-15 June-14 % Change Net Sales 302.70 302.30 0.13 PAT 13.90 10.50 32.38 EPS 1.53 1.16 31.80 EBITDA 58.40 56.10 4.10 The company has achieved a turnover of Rs. 302.70 million for the 1 st quarter of the financial year 2015-16 as against Rs. 302.30 million in the corresponding quarter of the previous year. EBITDA of Rs. 58.40 million in Q1 FY16, an increase of 4.10% against the corresponding period of last year. In Q1 FY16, net profit of Rs. 13.90 million against Rs. 10.50 million in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 1.53 for the 1 st quarter as against an EPS of Rs. 1.16 in the corresponding quarter of the previous year. Break up of Expenditure Break up of Expenditure Cost of materials consumed Employee benefits expense Depreciation & amortization expense (Rs. In millions) Q1 FY16 Q1 FY15 % Change 69.50 75.20-8% 103.70 96.80 7% 18.00 20.20-11% Other expenses 82.10 78.00 5%
Segment Revenue COMPANY PROFILE KDDL Limited is a diverse company focusing on the business of Watches and Precision Engineering. For over two decades it has been a leading supplier of high quality watch components to international brands in Switzerland and India. The company has established India s largest retail chain for Swiss Watches - ETHOS Swiss Watch Studios. Company s Precision Stamping Division offers high precision pressed components and tooling solutions for a wide range of engineering applications. The watch hands production factory at Bangalore was set up in 1997 and has a capacity of making over 30 million hands annually. Company s global customer base is concentrated in India, Switzerland and Hong Kong. EIGEN, the precision stamping division was established in 2004 to cater to a wide range of requirements from automobile, electronics and other fine engineering applications. The retail chain ETHOS, established in 2003, has grown into India s largest retailer of Swiss watches. Products Watch Dials Watch Hands EIGEN Engineering Swiss Watch Retail
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, 2014-2017E FY14A FY15A FY16E FY17E I. EQUITY AND LIABILITIES: A. Shareholders Funds a) Share Capital 91.24 91.64 91.64 91.64 b) Reserves and Surplus 401.66 433.60 441.87 477.22 Sub-Total-Net worth 492.90 525.24 533.51 568.86 B. Non-Current Liabilities: a) Long-term borrowings 220.65 192.20 182.59 175.29 b) Deferred Tax Liabilities [Net] 49.42 41.25 38.36 37.21 c) Other Long Term Liabilities 2.62 3.26 3.65 3.98 d) Long Term Provisions 28.52 26.41 25.35 24.85 Sub-Total-Long term liabilities 301.21 263.12 249.96 241.32 C. Current Liabilities: a) Short-term borrowings 238.38 232.46 235.95 242.08 b) Trade Payables 119.74 116.15 117.31 120.83 c) Other Current Liabilities 211.21 181.71 174.44 169.21 d) Short Term Provisions 27.87 42.70 52.95 59.30 Sub-Total-Current Liabilities 597.20 573.02 580.65 591.42 TOTAL-EQUITY AND LIABILITIES (A+B+C) 1391.31 1361.38 1364.12 1401.61 II. ASSETS: D. Non-Current Assets: Fixed Assets I. Tangible Assets 558.31 518.37 492.46 497.38 II. Intangible Assets 15.26 14.24 13.53 13.26 III. Capital work-in-progress 7.22 20.30 25.38 29.18 a) Sub-Total-Fixed Assets 580.79 552.91 531.36 539.82 b) Non Current Investments 185.77 186.87 190.61 193.47 c) Long Term Loans and Advances 47.69 56.05 62.78 69.68 d) Other non-current assets 2.23 0.24 0.17 0.18 Sub-Total-Non-Current Assets 816.48 796.07 784.91 803.16 E. Current Assets: a) Inventories 208.96 218.98 225.55 231.19 b) Trade Receivables 181.04 179.50 183.09 185.84 c) Cash and Bank Balances 65.70 61.83 63.07 64.96 d) Short Term Loans and Advances 118.51 103.46 105.22 113.78 e) Other Current Assets 0.62 1.54 2.28 2.69 Sub-Total-Current Assets 574.83 565.31 579.21 598.45 TOTAL-ASSETS (D+E) 1391.31 1361.38 1364.12 1401.61
Annual Profit & Loss Statement for the period of 2014 to 2017E Value(Rs.in.mn) FY14A FY15A FY16E FY17E Description 12m 12m 12m 12m Net Sales 1116.00 1268.40 1390.17 1501.38 Other Income 12.50 11.70 14.98 17.37 Total Income 1128.50 1280.10 1405.14 1518.75 Expenditure -914.00-1020.10-1124.64-1216.42 Operating Profit 214.50 260.00 280.50 302.33 Interest -81.90-80.60-83.02-87.17 Gross profit 132.60 179.40 197.48 215.17 Depreciation -59.30-73.90-76.41-78.25 Exceptional Items -5.90-1.40 0.00 0.00 Profit Before Tax 67.40 104.10 121.07 136.92 Tax -25.00-39.00-46.13-51.34 Net Profit 42.40 65.10 74.94 85.57 Equity capital 90.40 90.80 90.80 90.80 Reserves 375.00 401.70 441.87 477.22 Face value 10.00 10.00 10.00 10.00 EPS 4.69 7.17 8.25 9.42 Quarterly Profit & Loss Statement for the period of 31 st Dec, 2014 to 30 th Sep, 2015E Value(Rs.in.mn) 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15E Description 3m 3m 3m 3m Net sales 312.70 309.60 302.70 343.26 Other income 2.70 7.20 4.30 3.78 Total Income 315.40 316.80 307.00 347.05 Expenditure -249.70-255.90-248.60-271.52 Operating profit 65.70 60.90 58.40 75.53 Interest -18.70-20.90-19.30-20.54 Gross profit 47.00 40.00 39.10 54.99 Depreciation -17.50-17.10-18.00-17.35 Profit Before Tax 29.50 22.90 21.10 37.64 Tax -10.00-10.50-7.20-14.26 Net Profit 19.50 12.40 13.90 23.37 Equity capital 90.60 90.80 90.80 90.80 Face value 10.00 10.00 10.00 10.00 EPS 2.15 1.37 1.53 2.57
Ratio Analysis Particulars FY14A FY15A FY16E FY17E EPS (Rs.) 4.69 7.17 8.25 9.42 EBITDA Margin (%) 19.22 20.50 20.18 20.14 PBT Margin (%) 6.04 8.21 8.71 9.12 PAT Margin (%) 3.80 5.13 5.39 5.70 P/E Ratio (x) 59.72 39.07 33.94 29.72 ROE (%) 9.11 13.22 14.07 15.07 ROCE (%) 29.62 36.41 37.52 38.62 Debt Equity Ratio 0.99 0.86 0.79 0.73 EV/EBITDA (x) 13.64 11.18 10.33 9.58 Book Value (Rs.) 51.48 54.24 58.66 62.56 P/BV 5.44 5.16 4.77 4.48 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 280.10, the stock P/E ratio is at 33.94 x FY16E and 29.72 x FY17E respectively. Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.8.25 and Rs.9.42 respectively. Net Sales and Operating profit of the company are expected to grow at a CAGR of 12% and 25% over 2014 to 2017E respectively. On the basis of EV/EBITDA, the stock trades at 10.33 x for FY16E and 9.58 x for FY17E. Price to Book Value of the stock is expected to be at 4.77 x and 4.48 x for FY16E and FY17E respectively. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend BUY in this particular scrip with a target price of Rs.322.00 for Medium to Long term investment. INDUSTRY OVERVIEW Swiss Watch Industry The Swiss Watch industry maintained its growth rate at 1.9%, same as in 2013, with exports worth 22.2 billion francs in the year 2014. This year again, the watch industry witnessed consolidation, while its biggest importing markets, Hong Kong remained stagnant and China markets declined by 3% over 2013. Overall, during the year, Switzerland exported 28.6 million watches in 2014, i.e almost half-million more than in 2013. While the outlook
is decidedly weak on Chinese markets, newer markets, in particular, India and Indonesia are expected to develop interesting opportunities for the industry, with European and US markets strengthening. China exported 669 million pieces of watches in 2014, growth of 5.5% over previous year. On the other hand, Hong Kong export declined by 4.9% to 315.1 million pieces. Volumes wise, Switzerland maintained its third position with exports of 28.6 million watches in 2014, growth of 1.7% over previous year. Product Innovation continues to be in focus. Launch of Apple's i-watch is expected to be the next big thing in the watch industry. Although few believe that it will destabilize the Swiss Watch markets. Industry experts as well as the Company believes that the introduction of this product will induct new customers, will bring along new tech-frenzied generation under its purview and in the long term, expand the market. Indian Watch Market The Indian Luxury watch market is evolving with its consumer base expanding with the nouveau riche generation and fast growing professionals as well as the aspiring youth joining the league. This change is seen largely due to visibility, accessibility and availability of luxury brands in the country, lifestyle standards and increase in high disposable income. Indian market is becoming a focus area for major luxury watch brands across globe, given its huge growth potential. Luxury brands that are already present in the country, are allocating more resources towards brand building initiatives. Others are planning an entry to this large future market. Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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