Shri Lakshmi Cotsyn is a textile processing company and has grown at a rapid pace in the last couple of years. The company has transformed into an integrated player from the conventional textile company manufacturing suiting and shirting.
Industry
The textiles and apparels industry is targeted to grow at the rate of 16% in value terms to touch $115 billion (exports: $55 billion; domestic market $60 billion) by 2012, while the fabric production is expected to grow at the rate of 12% in volume terms.
The apparel industry is expected to grow at 16% in volume and 21 % in value, while exports are expected to grow at 22 % in value.
Business
The company is mainly into two segments: home-furnishing and fabrics. Fabrics include denim, bottom weight, blended, quilted and embroidery and home-furnishing includes terry towels and bed sheets. Besides this, it also supplies defence related items like bullet-proof jackets and helmets to defence establishments.
Expansion
The products mainly cater to lower to medium segment of market in the garment manufacturing. The manufacturing facilities are located at Fathephur, Uttar Pradesh and at Sonepat, Haryana. It is setting up garment manufacturing unit at Rorkee, Uttaranchal having the capacity of 10,000 trousers, 5,000 shirts and 5,000 ladies wear per day.
As part of expansion project at Fathephur, the nylon project will be completed soon. The unit will manufacture nylon-coated fabric, furnishing fabric (woven& knitted) with a capacity of 8.55 million metres per annum.
In December last year, the company announced its diversification into manufacturing of armoured vehicles and related items for military purpose. The business will be jointly promoted with UK-based company Armet Armoured Vehicles Ltd and Shri Lakshmi Cotsyn has a stake of 49% in the venture.
The unit will be established in Fatehpur, Uttar Pradesh.
Financials
The benefit of the expansion and diversification is reflected in the sales and profitability. Of late, competition has made the textile industry, a low margin business. Lakshmi Cotsyn has generated healthy margins in addition to growth during FY2006-07.
As compared to FY2005-06 the sales increased from Rs 360.03 crore to Rs 603.01 crore in FY2006-07, a jump of 67.48%. Net profit has shown a jump of 155.80% from Rs 15.84 crore to Rs 40.52 crore for the same period.
In the last five years, the net sales and profits have grown at a CAGR of 30.80% and 49.75% respectively. It has delivered results at very healthy operating margins at 15.30% during FY2006-07 as compared to 8.42% in FY2005-06. The company has employed financial leverage at its best, resulting in higher return on investment.
Its exports are mainly to UAE, Qatar, Srilanka, USA and Europe. During FY2005-06 ending June, export contributed 12.76% of the total sales. The low margin (5%-6%) suiting and shirting segment contributed 60.47% share. New segment contributed around 27%.
On the valuation front, the company?s fully diluted trailing twelve month earning per share is Rs 28.13. Considering the current price P/E multiple comes to 3.43(x) times.
?The author does not hold any investment in the company
