Nitin Spinners is a would be money Spinner Stock
Nitin Spinners will certainly prove to be a worthy buy in the mid to long term.Nitin Spinners is a Rs 10 face value stock,and is available @ a market cap of 535 crores over the TTM sales of 1028 crores and a net profit of 58 crores over it.Price to book of 2.09 is not bad at all.
Company is in aggressive expansion mode(they intend to spend seazable(nearly 500 crores on a completely integrated textile unit) amount on expansion apart from the expansion already implemented. Post-expansion, the addition to gross block of fixed assets caused a surge in depreciation. Since the Rs 290-crore plan was largely funded through debt (to the extent of nearly 75 percent), there was a rise in finance costs, too. A higher tax rate resulted in profitability compression. A healthy turnover growth rate of 50 percent in Q1 FY18 compared to the year-ago period is attributable to the operationalisation of the expanded cotton yarn (basic and knitted) and knitted fabric capacities in March 2017. Concurrently, raw material (cotton) procurement/processing costs and overheads increased. The spike in costs led to a decline in the EBITDA margins. This, however, should normalise as the operations stabilise.
For the new facilities, the capacity utilization rate is typically low at the time of commissioning. It will gain steam gradually in the coming quarters, before scaling up to the levels at which the pre-expansion manufacturing units operate. Higher sale volumes, coupled with greater emphasis on value-added yarn products (which fetch better realisations vis-a-vis traditional cotton yarn), should boost revenue growth going forward.
For the company s overall financials to change noticeably, it is imperative that operating leverage kicks in as soon as possible.
Repayment of debt amounting to Rs 70 crore during FY18 will reduce the strain on the company s profit margins in due course. The benefit of lower interest rates under the Amended Technology Upgradation Fund Scheme will also continue to be available.This being the reason for the low interest(22 crores against 33 crores paid in the previous year)they have paid. Cotton prices are expected to ease in the current fiscal because of higher acreage across India.This will be additional advantage.
In a nutshell my view is that Nitin Spinners is going to be a money spinner for the investors in the long run.
Happy investing
Nitin Spinners will certainly prove to be a worthy buy in the mid to long term.Nitin Spinners is a Rs 10 face value stock,and is available @ a market cap of 535 crores over the TTM sales of 1028 crores and a net profit of 58 crores over it.Price to book of 2.09 is not bad at all.
Company is in aggressive expansion mode(they intend to spend seazable(nearly 500 crores on a completely integrated textile unit) amount on expansion apart from the expansion already implemented. Post-expansion, the addition to gross block of fixed assets caused a surge in depreciation. Since the Rs 290-crore plan was largely funded through debt (to the extent of nearly 75 percent), there was a rise in finance costs, too. A higher tax rate resulted in profitability compression. A healthy turnover growth rate of 50 percent in Q1 FY18 compared to the year-ago period is attributable to the operationalisation of the expanded cotton yarn (basic and knitted) and knitted fabric capacities in March 2017. Concurrently, raw material (cotton) procurement/processing costs and overheads increased. The spike in costs led to a decline in the EBITDA margins. This, however, should normalise as the operations stabilise.
For the new facilities, the capacity utilization rate is typically low at the time of commissioning. It will gain steam gradually in the coming quarters, before scaling up to the levels at which the pre-expansion manufacturing units operate. Higher sale volumes, coupled with greater emphasis on value-added yarn products (which fetch better realisations vis-a-vis traditional cotton yarn), should boost revenue growth going forward.
For the company s overall financials to change noticeably, it is imperative that operating leverage kicks in as soon as possible.
Repayment of debt amounting to Rs 70 crore during FY18 will reduce the strain on the company s profit margins in due course. The benefit of lower interest rates under the Amended Technology Upgradation Fund Scheme will also continue to be available.This being the reason for the low interest(22 crores against 33 crores paid in the previous year)they have paid. Cotton prices are expected to ease in the current fiscal because of higher acreage across India.This will be additional advantage.
In a nutshell my view is that Nitin Spinners is going to be a money spinner for the investors in the long run.
Happy investing
my additional points are as follows
ReplyDelete1) The Net Profit Margin is at optimum level compare to other Textile Companies so percentage wise Margin will not improve. 2) As per thumb rule the amount of reduction in Debt is generally adding with the Marketcap. So if you estimate reduction in debt of 70 crores in a year so it will be added in present Marketcap. 3) At current price of 118, Marketcap is 540 and Sales is 1028, NPM is 5.65, PSR 0.53 which means extremely cheap stock. Generally stock price is trading on future price of next year so from point no. 2 we can estimate fair price of this stock=(540 70)/540*118 =133. 4) The stock will perform on the basis of volume not the Profit Margin and if it can maintain its fair Profit Growth of above 15% sudden spike will take it to PSR above 1 However, I have started accumulating from 122 level and now average price of buying 117.72 and I am least worried about its long term growth.
Hi. What is your current conviction on this. It corrected quite a bit, but the Intergrated textile unit is operational. Since they plan to include a significant proportion of value added fabrics to their product mix, do you see the NPM improving? What would be your ultimate target and the holding period.
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