Multibagger stock gains 134% in 6 months, FII stake rises 2.08% QoQ: buy?

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With a market value of 3,079.72 crore, Kewal Kiran Clothing Ltd. is a small-cap company that operates in the Consumer Discretionary Goods and Services (CDGS) sector. Kewal Kiran Clothing Limited (KKCL), one of India’s leading branded clothing manufacturers, specializes in the design, manufacture and marketing of well-known Indian clothing brands including Killer, Easies, LawmanPg3 and Integriti. For the financial year 2022-2023, the Board of Directors has announced a first interim dividend of 30% or Rs. 3 per share, on 6,16,25,185 equity shares of Rs. 10 each. The payment date for the aforementioned interim dividend will be on or after November 14, 2022. Following Kewal Kiran Clothing Ltd.’s second quarter results, brokerage firm ICICI Direct Research maintained a Buy recommendation on the stock.

Research analysts ICICI Direct Research said in a note that “KKCL’s share price has appreciated 120% over the past year (three-year CAGR of 30%). It has one of the best margin profiles among branded apparel players with a healthy b/s. We believe that KKCL is well placed to benefit from the recovery in demand thanks to a strong portfolio of brands and a pan-India network of stores and distribution. We have a BUY rating on the stock. We appreciate KKCL at 580 or 26x the profits of the 24E exercise.”

KKCL is well positioned to benefit from strong demand thanks to its diversified product portfolio and established distribution network. Many regional brands and unorganized apparel players are financially stressed due to the impact of the pandemic, which is beneficial for organized players like KKCL, the company has virtually debt-free status (D/E: 0.2x) with cash and investments worth 338 crore and revenue, earnings CAGR of 22%, 29% for fiscal years 22-24E, respectively, are the top 3 drivers of future share price performance according to analysts.

They further stated in their research note that “KKCL continues to be one of the most profitable branded clothing players in India with a strong presence in the men’s branded clothing category. Strategically, the company plans to continue expanding its light asset stores, which would be driven by franchised outlets across India.Additionally, the company is expanding its presence in select national chain stores and flats. -forms of e-commerce, which would allow it to acquire a new set of customers.In addition, to fuel revenue growth, KKCL plans to continue to expand its product portfolio and increase its share of consumer wallet. KKCL is further strengthening its own digital and e-commerce platform to capitalize on its brand strengths and thereby provide omnichannel access across its EBO network. are positive to provide the necessary momentum to its revenue trajectory and we expect the company to record Revenue, Earnings CAGR of 22% and 29% in FY22-24E, respectively, with ratios performance greater than 20% or more.”

Net profit of Kewal Kiran Clothing increased on an individual basis by 44.82% year-on-year to reach 39.13 crores in Q2FY23 as opposed to 27.02 crore in Q2FY22. In Q2FY23, sales increased 29.28% year-over-year to reach 226.34 crore from 175.08 crore in Q2FY22. On a consolidated basis, Kewal Kiran Clothing’s net profit increased by 45.59% year-on-year to reach 39.09 crore in Q2FY23 from 26.85 crores in Q2FY22. Of 175.08 crores in Q2FY22 at 226.34 crores in Q2FY23, sales were up 29.28% year-on-year. EBITDA margin improved by 370 basis points year-on-year to 22.1% in Q2FY23 (Q2FY22: 18.4%, Q1FY23: 19%). EBITDA was at 50 crore at Q2FY23 vs. 32.3 crores in Q2FY22 (T1FY23: 29 crore).

Shares of Kewal Kiran Clothing Limited closed at Rs. 500.00 apiece on Friday, up 0.85% from the previous close of Rs. 495.80. The stock has produced a multibagger return of 105.76% over the past year, and so far in 2022 it has produced a multibagger return of 115.47% year-to-date. The stock has produced a multibagger return of 134.74% over the past six months and has gained 22.84% over the past month. For the quarter ended September or Q2FY23, the company reported sponsor ownership of 74.25%, FII ownership of 3.95% vs. 1.87% in Q1FY23, DII ownership of 5.60% versus 5.90% in Q1 and public ownership of 16.21% versus 17.98% in Q1.

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