Orbit Exports Limited Date: 5 th January, 2016 Stock Performance Details Shareholding Details September 2015 Current Price : ` 387.9^ Face Value : ` 10 per share 52 wk High / Low : ` 494.8 / 302.2 Total Traded Volumes: 215 shares^ Market Cap : ` 555.8 crore^ Sector : Textiles EPS (H1 FY16) : ` 11.96 per share Equity Share Capital : ` 14.3 crore P/E (TTM) : 18.83 (x)^ P/BV (TTM) : 5.94 (x)^ Financial Year End : 1 st April 31 st March BSE Scrip Name : ORBTEXP BSE Scrip Code : 512626 ^ As on 1 st January, 2016 Particulars Shareholding Nos. (%) Promoter & Promoter Group Holding 75,86,972 53.06 Total Institutional Holdings (FIIs & DIIs) 2,61,970 1.83 Public Holdings 64,50,208 45.11 Total 1,42,99,150 100.00 Background Orbit Exports, established in 1983 as a weaving company is a manufacturer and exporter of novelty fabrics exports its products to over 32 countries including USA, Latin America, Europe and Far East. It is recognized as a star export house and is engaged in a highly niche business segment of manufacturing and exporting faux silk as against natural silk. This finds application largely in designer apparel for women, Christmas Craft, Home Décor and certain specific fabrics and finished products. The Company s products include faux silk, jacquards, made-ups, apparel, ribbon for use in Christmas craft, bridal wear. The company has reputed clientele such as Calvin Klein, Zara and Debenhams. The Company s registered office is in Mumbai while, it has manufacturing plants located at Surat (Gujarat), Kalyan and Dombivili (Maharashtra). So as to cater to the growing opportunity in the international market, the Company set up a wholly owned subsidiary in Los Angeles (USA) two years back. It was in FY 2015, that the Company broke even and the management expects to report profit in FY 2016 as stated in the Annual Report for FY 2015. Further, the Company is undertaking expansion of its capacity at Kosamba, Gujarat to be able to service this growing opportunity. In line with its focus to grow the Ribbon business, Orbit Exports has moved to a new facility at Kalyan. With capacity expansion, the Company s production is set to increase by three times as estimated by the management of the Company. An Initiative of the BSE Investors Protection Fund1
Financial Snapshot Particulars Standalone (` Million) Income Statement H1 FY16 H1 FY15 Income from Operations 810.0 797.0 Y-o-Y Growth (%) 1.6 16.0 EBITDA 231.8 190.5 Y-o-Y Growth (%) 21.7 26.7 EBITDA Margin (%) 28.6 23.9 Net Profit 171.0 147.2 Y-o-Y Growth (%) 16.2 17.2 NPM (%) 21.1 18.5 Balance Sheet Fixed Assets 863.8 683.7 Cash and Bank Balances 65.6 78.2 Inventories 227.7 220.1 Net Working Capital 491.9 406.7 Net Worth 1,106.6 880.8 Balance Sheet Ratios ROCE (%) 18.3 18.6 RONW (%) 15.5 16.7 Source: Capitaline From the Research Desk of LKW s Gurukshetra During H1 FY16, the company reported a growth of 1.6% in its Operational Income which stood at Rs. 810 million compared to Rs. 797 million reported in H1 FY15. This was mainly due to devaluation of the currency which led to softening of revenues. Besides this, the reason as stated by the management for subdued performance is a decline in volumes of 10% in H1 FY16 compared to H1 FY15. It must be noted that the Other Operating Income for the period under review (H1 FY16) has increased by 33% over the corresponding period in the previous fiscal. The same in H1 FY16 stood at Rs. 41.1 million versus Rs. 30.9 million in H1 FY15. The Company changed its dividend policy stating that it would announce the Dividend if any at the end of Q3 and Q4. EBITDA Margin increased from 23.9% in H1 FY15 to 28.6% reported in H1 FY16 mainly due to decline in Raw Material costs (13.7% decline) and Other Expenses (9.9% decline) on absolute basis as well as in percentage terms. The reported EBITDA was Rs. 231.8 million as against Rs. 190.5 million. Fixed Assets too have increased by 26.3% over H1 FY15 on account of a new facility the company purchased a new factory at Kalyan Asmeeta Textile Park. Fixed Assets as on September 2015 stood at Rs. 863.8 million compared to Rs. 683.7 million. An Initiative of the BSE Investors Protection Fund2
Performance on the Bourses 150 120 90 Stock Performance as on 30th December, 2015 % 60 30 0 Orbit Exports BSE Small Cap Peer Comparison Orbit Exports, which operates in the diverse Textile industry has carved a niche for itself by engaging its business in manufacture of specialize fabric such as faux silk, jacquard etc. Thus there is no directly comparable peer in the Textile industry. However, the below mentioned table provides the competitive positioning of the company vis-à-vis the other players in the industry. (` In millions) Particulars Orbit Exports Kitex Garments Income from Operations 810.0 2,170.3 EBIDTA 231.8 489.7 Net Profit 171.0 431.3 EBIDTA Margins (%) 28.6 22.6 PAT Margins (%) 21.1 19.9 Book Value Per Share 65.4 55.6 P/E (x)^ 19.05^ 37.21^ P/BV (x)^ 6.02^ 15.21^ RONW (%) 15.5 14.2 Source: Capitaline Financials on Standalone Basis; ^On a Standalone basis as on September, 2015 (TTM Basis) An Initiative of the BSE Investors Protection Fund3
About the Industry The Indian Textile Industry is one of the largest contributors of employment as well as to the overall trade exports of India. The Indian Textile industry is spread across the length and breadth of the country and in terms of employment is labour intensive. The industry is divided between two prominent segments, that is, hand spun and hand woven segment as against a capital intensive sophisticated mills segment. Not just being amongst the largest employers, the Textile industry has also contributed to the trade exports of the country quite significantly over the years. The industry realized export earnings worth US$ 41.4 billion in FY 2015, marking a growth of 5.4% as per data from The Cotton Textiles Export Promotion Council (Texprocil). Another important characteristic of this sector is the dominance of unorganized segment which consists of handloom, handicrafts sericulture which operates on a small scale and adopts traditional manufacturing tools. In contrast to this, the organized segment though as a percentage of the overall industry is small, it brings to the table economies of scale and contributes a large part of the total textile export earnings of the country. It is estimated that the Indian Textile industry could reach US$ 223 billion over the next 5-6 years from the current size of US$ 108 billion. This indicates that the industry growth would more than double in the next 5-6 years. As a percentage of the Indian GDP and Index of Industrial Production, this industry constitutes about 5% and 14% respectively. Given the importance of this industry to overall GDP growth, the government has allowed 100% FDI in this sector under the automatic route; the TUFS Scheme, Textile Parks etc are the other initiatives taken by the Government to promote manufacturing of textiles and thereby increase export revenues for the industry. Besides, the government has also provided for subsidies on machinery and infrastructure. The Indian Government has signed a MoU with Kyrgystan seeking to strengthen bilateral co-operation in the fields of Textiles, Clothing, Silk and Sericulture and Fashion. Management Outlook The Management is hopeful that the Indian Textile industry is poised to grow at a fast pace. A growing young-middle class population offers immense growth opportunities for the industry to expand domestically. In the international markets the competitive positioning of Indian Textiles (cost competitive) is expected to aid growth for the industry. Further, an improvement in the US economic growth augurs well for the company given that it exports niche fabrics to North America which includes faux leather used in designer apparel. Also, the ongoing festive season particularly Christmas and New Year celebrations (demand for ribbons and other gift articles) seem to have fared relatively better than the previous year. Cheaper oil is said to improve real incomes and consumer sentiment. While the recent rate rise by the Federal Reserve is indicative that the US Economy is set to grow in the coming year as against a subdued backdrop notices post the 2008 financial crisis. However, it would be noteworthy to monitor the ability of the company to address issues emanating from the rising demand from the western world besides the domestic market. Furthermore, its ability to manage competitive pressure will be crucial for a sustain growth in the business for Orbit Exports. Currency fluctuation and exposure to Latin America to generate revenues are the other key risks that the company faces. Amongst the key factors affecting growth of Indian Textile Industry is its labour intensive nature, high dependence on monsoon and capital intensive nature. Also, its fragmented nature is hurting the quest for consistent growth in the exports market for the overall industry. An Initiative of the BSE Investors Protection Fund4
Financial Graphs 850 Net Income from Operations ` in Million 800 797.0 810.0 750 H1 FY15 H1 FY16 EBIDTA & EBIDTA Margins 250 28.6 30 ` in Million 200 150 100 50 190.5 231.8 23.9 27 % 24 0 H1 FY15 H1 FY16 21 EBIDTA EBIDTA Margins 180 PAT & PAT Margins 21.1 22 ` in Million 160 140 18.5 171.0 20 % 18 147.2 120 H1 FY15 H1 FY16 16 PAT PAT Margins An Initiative of the BSE Investors Protection Fund5
Disclaimer All information contained in the document has been obtained by LKW s Gurukshetra from sources believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and LKW s Gurukshetra in particular makes no representation or warranty express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements based on available data, and LKW s Gurukshetra shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our company and should not be construed as any indication of our recommendation to buy, sell or invest in the company under coverage. Disclosure Each member of the team involved in the preparation of this report, hereby affirms that there exists no conflict of interest. The report has been sponsored and published as part of Initiative of BSE s Investors Protection Fund About Us LOTUS KNOWLWEALTH (LKW) commenced business in 1991 and is currently engaged in providing CAPITAL MARKET RESEARCH, INVESTMENT ADVISORY and STRATEGY services. GURUKSHETRA is the Research and Training arm of LKW. LKW Investment Advisers is the SEBI registered Investment Advisory arm of LKW. 5 Contact Us LOTUS KNOWLWEALTH Pvt. Ltd. Regd. Office: B Wing, 505-506, Fairlink Centre, Off Andheri Link Road, Andheri (W), Mumbai 400 053. Email: enquiry@lotusknowlwealth.com Tel: 022-4010 5482 4010 5483 Website:www.lkwindia.com An Initiative of the BSE Investors Protection Fund6