1
Mar 19, 2018
Nandan Denim Ltd
Apparel & Textile Products
Nandan Denim Ltd
India Research - Stock Broking
BUY
Bloomberg Code: NAND IN
Recommendation (Rs.)
CMP (as on Mar 16, 2018) 136
Target Price 166
Upside (%) 22
Stock Information
Mkt Cap (Rs.mn/US$ mn) 6556 / 101
52-wk High/Low (Rs.) 187 / 112
3M Avg. daily value (Rs.mn)
21.8
Beta (x) 0.8
Sensex/Nifty 33176 / 10195
O/S Shares(mn) 48.0
Face Value (Rs.) 10.0
Shareholding Pattern (%)
Promoters 60.2
FIIs 8.8
DIIs 0.1
Others 30.9
Stock Performance (%)
1M 3M 6M 12M
Absolute (8) (15) (8) 15
Relative to Sensex (5) (14) (10) 3
Source: Bloomberg
Relative Performance*
Source: Bloomberg; *Index 100
Analyst Contact
Thomas V Abraham
040 - 3321 6323
thomas.abraham@karvy.com
For private circulation only. For important information about Karvy’s rating system and other disclosures refer
to the end of this material. Karvy Stock Broking Research is also available on Bloomberg, KRVY<GO>,
Thomson Publishers & Reuters
Exhibit 1: Valuation Summary
YE Mar (Rs. Mn) FY16 FY17 FY18E FY19E FY20E
Net Sales 11567 12204 14496 15218 15480
EBITDA 1911 1899 2443 2664 3072
EBITDA Margin (%) 16.5 15.6 16.9 17.5 19.8
Adj. Net Prot
#
633 567 603 751 884
EPS (Rs.) 13.9 11.8 12.5 15.6 18.4
RoE (%) 21.2 14.9 13.6 15.0 15.6
PE (x)* 8.4 10.2 10.8 8.7 7.4
Source: Company, Karvy Research, *Represents multiples for FY16 & FY17 are based on historic market price,
# Includes MinorityInterest
Largest Organized Player in Denim, Banking on Rising
Urbanization
We expect Nandan Denim Ltd’s business to turn around, backed by stabilization
in the economy post the structural changes of the last 2 years. There exists huge
opportunities for growth in the long term, considering the low penetration of denim
in India and increasing urbanization. We value the stock at 9.0x on FY20E EPS
of Rs. 18.4, and recommend ‘BUY’, with a target price of Rs. 166, and potential
upside of 22%.
Nandan is the largest denim manufacturer in India. It aims to take advantage of
the domestic growth in urbanization and continued increase in demand for denim,
which has grown at 15% CAGR over FY13-17. Despite a troublesome 2HFY17 and
9MFY18, we expect turnaround due to the following reasons:
As per IMF, India is expected to witness a turnaround and become the fastest
growing major economy, with estimated GDP growth of 7.4% & 7.8% in 2018 &
2019, from 6.7% in 2017. This will increase the rate of urbanization trend and
with it the per capita income.
It favours organized players like Nandan, which, through B2B clientel such as
Killer, Being Human, Wrangler and large format stores - Pantaloons, Big Bazaar,
Shoppers Stop and Myntra stands to benet from the urbanization theme, by
being a transitional player from the unorganized to branded names.
India’s per capita purchase of denim currently stands at 0.3 vs 9 in developed
nations, thus signalling a signicant growth opportunity in the long term.
Estimates and Catalyst: Growth in domestic economy and govt. incentives to
boost textile industry can be signicant catalyst. We expect demand to recover from
FY19E onwards, but given the overcapacity in the industry and subdued demand
scenario in the 9MFY18, we expect realizations to be lower and factor revenue
growth of 8% over FY17-19E. Operational eciencies from newly operational
backward integration and lower nance costs should further boost bottomline. We
factor PAT growth of 16% CAGR over the same period.
Valuation & Risks
Given the good growth rate in the industry and continuous good performance in
the last 3 years, the stock has re-rated. We value the stock 9.0x, (a premium to the
3 year average valuation of 8.3x) on FY20E EPS of Rs.18.4 and arrive at a target
price of Rs.166, and recommend ‘BUY’. Key risks are change in demand trends &
longer period of subdued growth.
80
100
120
140
160
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug -17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Nandan Deni m Ltd
Sensex
2
Mar 19, 2018
Nandan Denim Ltd
Company Background
Nandan denim, based in Ahmedabad, is a part of the Chiripal
group. Commencing its operations in 1994 with textile trading
business, the company forayed into manufacturing in 2004.
From being a pure denim manufacturer, over time, the company
has diversied its business into shirting and other fabrics (13%
revenues as of FY17).
Nandan in FY17 expanded its capacity from 99MMPA to 110
MMPA, thus, making it the largest denim manufacturer in India
and the 4th largest in the world.
The Chiripal group, incorporated in 1972, is a professionally
managed business entity, with presence across diverse
business elds such as petrochemicals, spinning, weaving,
knitting, fabric processing, chemicals, infrastructure,
Packaging and Educational institutions to the group business.
Exhibit 2: Shareholding Pattern (%)
Source: BSE, Karvy Research
Exhibit 3: Revenue Segmentation (%)
Source: Company, Karvy Research
Balance sheet (Rs. Mn)
FY18E FY19E FY20E
Total Assets 12472 12836 13944
Net Fixed assets 7372 7034 7665
Current assets 4766 5344 5814
Other assets 334 457 465
Total Liabilities 12472 12836 13944
Networth 4201 4695 5311
Debt 5797 4825 4331
Current Liabilities 2248 2744 2987
Other liabilities 226 572 1315
Balance Sheet Ratios
RoE (%) 13.6 15.0 15.6
RoCE (%) 17.8 19.1 20.5
Net Debt/Equity (x) 1.0 0.7 0.6
Equity/Total Assets 0.4 0.4 0.4
P/BV (x) 1.4 1.2 1.1
Source: Company, Karvy Research
Cash Flow (Rs. Mn)
FY18E FY19E FY20E
PBT 804 1001 1179
Depreciation 1149 1229 1413
Interest (net) 490 434 480
Ta x (201) (250) (295)
Changes in WC (12) (82) 11
Others 0 0 0
CF from Operations 2230 2331 2788
Capex (829) (891) (2043)
Others 405 (110) 21
CF from Investing (424) (1001) (2023)
Change in Debt/Interest (972) (494) 390
Dividends (108) (105) (150)
Others (357) (531) (474)
CF from Financing (1438) (1130) (234)
Change in Cash 194 257 489
Source: Company, Karvy Research
Company Financial Snapshot (Y/E Mar)
Profit & Loss (Rs. Mn)
FY18E FY19E FY20E
Net sales 14496 15218 15480
Optg. Exp (Adj for OI) 12053 12554 12407
EBITDA 2443 2664 3072
Depreciation 1149 1229 1413
Interest 531 476 519
Other Income 40 42 39
PBT 804 1001 1179
Ta x 201 250 295
Adj. PAT 603 751 884
Profit & Loss Ratios
EBITDA Margin (%) 16.9 17.5 19.8
Net Margin (%) 4.2 4.9 5.7
P/E (x) 10.8 8.7 7.4
EV/EBITDA (x) 4.5 3.8 3.3
Dividend yield (%) 79.8 99.4 117.1
Source: Company, Karvy Research, * Includes Minority Interest
Denim
79.3%
Shirting
fabric
6.3%
Others
13.9%
Promoters
60.7%
FIIs 7.2%
DIIs 0.2%
Others 32.0%
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Mar 19, 2018
Nandan Denim Ltd
Two growth levers in the domestic market:
Gap between India and developed nations in terms of per capita denim
consumption
India denim growth (15% CAGR) has outpaced the domestic apparel growth
(2.5%CAGR) and global denim growth (6.5%) in the past 5 years. Despite this
outperformance, India continues to be under penetrated with respect to developed
economies.
Additionally, lower dependency ratio (51%, as of 2016), rising urbanization and
increasing acceptance of denim amongst women (10% market share) and kids (5%
market share) will add signicantly to the growth rate.
We expect per capita denim consumption gap between India and developed
nations to bridge further from the current 0.3 (domestic) vs 9 per person (developed
nations).
54,600
27,200
42%
15% CAGR (PP)
29%
9%
13,880
9,800
7,5706,930
2010 2011 2012 2013 2018 (P) 2023 (P)
Value (Rs. Crore) Increase (%)
Exhibit 4: Domestic Growth Expectation for Denim
Source: Company Annual Report, Karvy Research
A view on the segment
The denim space in India continues to be largely occupied by the unorganized space
(60% market share), catering to the private labels. Organized segment consists of
players like Nandan Denim and Arvind. Some of the more direct competitors are KG
Denim, and Aarvee Denim. However, the largest capacity is with Nandan and Arvind
(110 mn metres and ~100mn metres).
Strengths:
Established and prominent player in the aordable branded denim space.
Signicant backward integration helps in better working capital management.
Weakness:
There is currently an overcapacity in the domestic denim space. Being in the mass
branded space (with no brands of its own), the company is not a price setter.
Fluctuating raw material prices can have a signicant impact on gross margins.
Opportunity:
Though exports contribute only 8%, the company already made inroads into 27
countries and also boasts of prestigious brands such as Ralph Lauren, Zara Mango,
Joe Fresh, Pull & Bear and Target. Their presence and association with brands can
help in the long run, when they decide to increase their exports, if the margin prole
improves.
Threats:
Change in trends and preferences of consumers.
Threat from unorganized sector.
4
Mar 19, 2018
Nandan Denim Ltd
Increased acceptance of denim amongst the young workforce
With GDP growth expected at 7.4% and 7.8% over the next two years, 12 Mn youth
between 15 and 29 years (age group in which denims are the most popular) are
expected to enter the workforce every year (source, World Bank).
Denim segment can be classied into 3:
Men’s segment – which is the main revenue contributor – 85% of the market, is
expected to grow at 14% CAGR in the next decade.
Women’s segment – 10% of the market and growing at 17.5% CAGR over the
same period.
Kids segment – 5% of the market.
Men’s and Women’s segment are expected to continue to grow at these rates.
Additionally, increased skilled labour and increased focus of the youth towards
market trends will aid in adding a second growth lever for the segment.
In line with the growth potential, the govt. supported various eorts to increase in
the segment via subsidies, etc. This led to companies investing heavily in capacity
additions. While we expect demand to recover and continue to grow at a historic
levels of 15% in the coming scals, realizations could be lower.
Vertical integration – Lesser dependency and improved cost efficiency
Nandan completed expansion of spinning capacity in Q3FY17, from 70 Tones per
day (TPD) to 141 TPD in-house, through which it plans to increase the in-house
production of yarn.
Management expects in-house production to provide a cost benet to the tune of
10% vs the cost of yarn in open market.
Yarn constitutes ~48% of the raw materials consumed. This will also lead to better
inventory management and more exibility in the product line, enabling the company
to be more adept to change in requirements.
Return ratios to improve on the back of increased spinning capacity
WACC currently stands at 10% (the nance subsidy currently not factored in)
with improved performance and no further capex plans in the pipeline, we expect
signicant improvement in protability and cash ows over the next two scals.
We factor RoCE to improve 530bps by FY20E, closer to the levels seen prior to the
disruptions in FY17. Additionally, we have not factored in the 5% interest subsidy
that Nandan has applied for, for the latest capex. The impending approval will lead
to further decline in interest costs.
However, we expect capacity utilization to reach near peak levels by FY20E and
expect additional capex in the period, a majority of it to be funded by internal
accruals. As of 9MFY18E, the denim capacity is working at ~ 78% utilization rate.
Cotton prices expected to trend downward:
According to ICAC (International Cotton Advisory Committee), in 2017/18, world’s
cotton production is expected to increase by over 8.1% for the 2nd straight year to
24.9 Mn supported by factors such as good monsoon, higher minimum support
price in India, good cultivation, higher prices in the US ,and higher subsidy in China.
China historically, in addition to being a producer, has also been one of the largest
importers of cotton (accounting for ~34% of global cotton imports). However,
Chinese imports have declined in recent times on the back of higher inventory
being liquidated by the government at a discount to market price.
Additionally, the global consumption is also expected to increase by only 2%, to
24.7 Mn, based on expectation in growth of global economy. As a result, ending
Exhibit 5: Spinning capacity (TPD)
Source: Company, Karvy Research
Exhibit 6: Spinning capacity (TPD)
Source: Company, Karvy Research
54
64
64
70
141
0 50 100 150
FY13
FY14
FY15
FY16
FY17
21.2%
21.7%
15.2%
17.8%
19.1%
20.5%
0.0% 5.5% 11.0% 16.5% 22.0%
FY15
FY16
FY17
FY18E
FY19E
FY20E
530
BPS
5
Mar 19, 2018
Nandan Denim Ltd
inventory for cotton (ex-China) is expected to rise by 17% to 9.6 Mn tons, one of the
highest recorded volumes. The high supply and lower demand could lead to higher
inventory and consequently lower prices of cotton.
A glance at the financial performance:
Taking into account the growing demand for denim, the company undertook an
aggressive expansion plan in FY14, rst, via increasing the Denim capacity from
76MMPA to 99MMPA and then in the second stage and increased spinning capacity
(backward integration – 64 tones per day to 70 tones per day).
The total capex for the expansion (phase 1 and 2), stood at Rs. 6,120 mn and was
funded with a D:E ratio of 2.4:1.
The company has always focussed on optimized growth. Expansions have always
been aligned with demand. Nandan has managed over ~80% and above utilization
(increasing every year) since FY14. Asset turnover ratios are 1.1x and above over
the same period.
Revenues grew by 14.8% CAGR (despite the demonetization impact) and
operational eciency improved (EBITDA margins 14.8% to 15.6% over the same
period - excluding the structural changes in FY17, EBITDA margins stood at 16.5%
in FY16). PAT growth stood at 16% CAGR over the same period.
Further, in FY16, factoring in further demand, the company continued to expand its
denim and spinning capacities. Denim capacity currently stands at 110MMPA and
the spinning capacity was doubled to 141Tones per day (TPD).
As of FY17, 48% of the raw materials is yarn. Backward integration will aid in
reduction of procurement of yarn from open market. As a result, we factor EBITDA
margin improvement to the tune of 330bps by FY20E (from FY16E).
Net working capital (NWC) days have improved post FY14 (from 103 days in FY13
to 76 days as of FY17). We expect NWC days to further improve by 19 days to 57
days by FY20E. With improved protability, debt equity ratio declined from 1.8x in
FY14 to 1.3x by FY16, and we expect it to further improve to 0.8x by FY20E.
A challenging FY17, demand improvement to take time
FY17 was particularly challenging for the sector as a whole as a result of muted
demand and demonetisation. In the scal, revenue grew 5% (the rst half of the
scal, the operating prot grew by a mere 2%, resulting in 10bps decline in operating
prot margin).
The second half of FY17 saw the company complete its biggest ever expansion
(doubled spinning capacity to 141TDP, and increased Denim capacity to 110 MMPA).
However, was not able to take full advantage due to the structural changes.
Additionally, lower realization and increased depreciation on the back of capex
completion lead to PAT decline of 11% YoY.
9MFY18 performance update and the way forward
Due to lower otake in demand, the manufactured yarn was sold in the open market.
As a result, the revenue contribution from Yarn stood at ~25% for 9MFY18, from less
than 7% In FY17. Thus despite the higher utilization of the spinning capacity (85%),
and backward integration, the company could not manage improvement in margins.
As demand picks up, we expect manufactured yarn to be used for value added
products, which will result in higher operating eciencies and return ratios. RoCE
in FY17 despite the hiccups, stood at 15% and going forward, we expect it to move
towards 20% by FY20E.
Exhibit 8: Asset Turnover Ratio (x)
Source: Company, Karvy Research
Exhibit 9: EBITDA & PAT Margins (%)
Source: Company, Karvy Research
1.3
1.1
1.0
1.2
1.2
1.1
0.0 0.4 0.7 1.1 1.4
FY15
FY16
FY17
FY18E
FY19E
FY20E
15.1%
16.5%
15.6%
16.9%
17.5%
19.8%
4.7%
5.5%
4.6%
4.2%
4.9%
5.7%
0%
5%
10%
15%
20%
FY15
FY16
FY17
FY18E
FY19E
FY20E
EBITDA margin
PAT Margin
Exhibit 7: Capacity utilization and
realization
Source: Company, Karvy Research
78
79
82
81
84
112
120
133
135
132
0
34
68
102
136
FY13
FY14
FY15
FY16
FY17
Capacity utilization ( M M PA)
Reali zation (Rs./M etr e)
6
Mar 19, 2018
Nandan Denim Ltd
Chiripal Group – Management and business verticals
The Chiripal group was formed in 1972, and since, has grown its presence from textile
to Chemicals, Packaging, Education and Infrastructure. The main revenue stream
continues to be from the textile segment.
Textile: Includes value added products such as Denim, and Shirting fabric as main
revenue contributors. With increased spinning capacity, and depending on the demand
for the value added products, the company also sells yarn in the open market.
Domestic sales contribute nearly 93% of the revenues - (as of FY17).
Chemicals: In the adhesives and specialty chemicals business. Products are used as
base for paints, paper, leather, packaging and textile industries.
Infrastructure: Into residential infrastructure and also operates a fully equipped
industrial park for textile sector.
Packaging: The company has two imported Biaxial orientation of polypropylene
(BOPP) lines from Bruckner, Germany for manufacturing lms capacity of 78,000
MTPA, two Metalizers for producing metalized lms, BOPET Line (capacity of 40,000
MTPA) to cater to wide demand for BOPET Products. and 600 MT per day polyethylene
terephthalate (PET) Resin Plant.
Education space: Runs 180+ pre k franchise play schools – Shanti Juniors, schools
under “Shanti Asiatic” across the country, elite pre-school under “Hop Skotch” and is
also present in management education space, and currently has student strength of
more than 200.
Textile
Chemicals
Packaging
Education space
BUSINESS VERTICALS
7
Mar 19, 2018
Nandan Denim Ltd
Exhibit 10: Business Assumptions
Y/E Mar (Rs. Mn) FY17 FY18E FY19E FY20E Comments
Consolidated
Revenue 12204 14496 15218 15480
Revenue Growth (%) 5.5 18.8 5.0 1.7
Cautious over revenue growth despite expected
increase in denim demand as realizations
contninue to lag.
EBITDA 1899 2443 2664 3072
EBITDA Margins (%) 15.6 16.9 17.5 19.8
48% of the raw material is Yarn. Doubling of spinning
capacity will improve margins signicantly.
PAT (normalized) 567 603 751 884
Fully Diluted EPS (Rs.) 11.8 12.5 15.6 18.4
Fully Diluted EPS Growth (%) (15.2) 6.4 24.5 17.8
Net CFO 1650 2230 2331 2788
Capex (2844) (829) (891) (2043)
Debt 5112 4461 3709 3611
Free Cash Flow (1193) 1400 1440 745
Source: Company, Karvy Research
Exhibit 11: Karvy vs Consensus
Karvy Consensus Divergence (%) Comments
Revenues (Rs. Mn)
FY18E 14496 16107 11.1
We expect revenue to skew towards denim
sales and thus proportion of yarn in the sales
mix is expected to decline.
FY19E 15218 17846 17.3
EBITDA (Rs. Mn)
FY18E 2443 2483 1.7
Backward integration and higher denim sales
will lead to improvement margin prole and
better EBITDA.
FY19E 2664 2812 5.6
EPS (Rs.)
FY18E 12.5 15.9 26.9
We have not factored in the interest subsidy
(applied for, and under review).
FY19E 15.6 18.1 15.6
Source: Bloomberg, Karvy Research
8
Mar 19, 2018
Nandan Denim Ltd
Exhibit 12: Revenue and Revenue growth
Source: Company, Karvy Research
Exhibit 14: PAT and PAT margin
Source: Company, Karvy Research
Exhibit 13: EBITDA and EBITDA margin
Source: Company, Karvy Research
Exhibit 15: RoE and RoCE
Source: Company, Karvy Research
In 2017, in particular, structural changes led to higher sale of yarn, which
contributed to the signicant revenue growth in 9MFY18. Going forward,
the growth should come back in line and on track with growth in the Denim
segment in the domestic market.
Historic performance and expectations at a glance:
On the back of operating eciencies, we expect bottomline growth of 16%
CAGR over FY17-20E.
Backward integration provides benets despite lower realization and we
expect demand to pick up from FY19E onwards and factor EBITDA growth
of 16%.
The recently completed capacity expansion is supported by state govt.
policies and retiring of higher cost debt over the next two years will lead to
further increase in return ratios.
11567
12204
14496
15218
15480
5.5%
5.5%
18.8%
5.0%
1.7%
0%
5%
10%
15%
20%
0
5200
10400
15600
FY16
FY17
FY18E
FY19E
FY20E
Revenue (Rs. Mn)
Revenue Growth (%)
1911
1899
2443
2664
3072
16.5%
15.6%
16.9%
17.5%
19.8%
10%
13%
15%
18%
20%
0
1000
2000
3000
FY16
FY17
FY18E
FY19E
FY20E
EBITDA (Rs. Mn)
EBITDA Margin (%)
633
567
603
751
884
5.5%
4.6%
4.2%
4.9%
5.7%
0%
2%
4%
6%
0
300
600
900
FY16
FY17
FY18E
FY19E
FY20E
PAT (Rs. Mn)
PAT Margin (%)
21.2%
14.9%
13.6%
15.0%
15.6%
21.7%
15.2%
17.8%
19.1%
20.5%
6%
11%
16%
21%
26%
FY16
FY17
FY18E
FY19E
FY20E
RoE (%)
RoCE (%)
9
Mar 19, 2018
Nandan Denim Ltd
Exhibit 17: Company Snapshot (Ratings)
Low High
1 2 3 4 5
Quality of Earnings
Domestic Sales
Exports
Net Debt/Equity
Working Capital Requirement
Quality of Management
Depth of Management
Promoter
Corporate Governance
Source: Company, Karvy Research
Exhibit 16: Debt to Equity
Source: Company, Karvy Research
Repayment of Rs. 500 Mn to Rs. 600 Mn per year in FY18E and FY19E
is expected. Yet, we do not see signicant improvement in the leverage
ratios as higher capacity utilization and demand improvement should lead
to further expansions.
1.3
1.4
1.0
0.8
0.8
0.6
0.8
1.0
1.2
1.4
1.6
FY16
FY17
FY18E
FY19E
FY20E
Debt to Equity (x)
10
Mar 19, 2018
Nandan Denim Ltd
Valuation
Expansion in line with the industry growth and being a dominant player in the denim
industry, the stock has re-rated in the last couple of years. We value the stock at 9.0x on
FY20E EPS of Rs. 18.4, and arrive at a target price of Rs. 166 and recommend ‘BUY’.
Exhibit 18: 1yr forward P/E
Source: BSE, Karvy Research
Exhibit 19: P/B to RoE
Source: Bloomberg, Karvy Research
Note: For Nandan, we have not taken into consideration the interest and power subsidy benets (as
it is not approved yet), which, we believe should be in the range of Rs.170-180 Mn. It will improve
the bottomline further and deliver RoEs in the range of 17%.
0
5
10
15
20
25
0.0 1.0 2.0 3.0 4.0
Trident
Welspun
SRF
Vardhman
KPR
Nandan
0
50
100
150
200
0
5
10
15
20
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug-15
Nov-15
Feb-16
May-16
Aug-16
Nov-16
Feb-17
May-17
Aug-17
Nov
-17
Feb-18
+1SD
-1SD
SD
+2SD
-2SD
Price (Rs.)
Key Risks
Volatility in cotton prices.
Slower than expected pickup in demand.
Substitution products garnering more demand.
11
Mar 19, 2018
Nandan Denim Ltd
Financials
Exhibit 20: Income Statement
YE Mar (Rs. Mn) FY16 FY17 FY18E FY19E FY20E
Revenues 11567 12204 14496 15218 15480
Growth (%) 5.5 5.5 18.8 5.0 1.7
Operating Expenses 9656 10305 12053 12554 12407
EBITDA 1911 1899 2443 2664 3072
Growth (%) 15.6 (0.6) 28.6 9.0 15.3
Depreciation & Amortization 660 862 1149 1229 1413
Other income 42 24 40 42 39
EBIT 1293 1062 1334 1477 1699
Interest Expenses 412 362 531 476 519
PBT 881 700 804 1001 1179
Tax 248 134 201 250 295
Adjusted PAT 633 567 603 751 884
Growth (%) 23.2 (10.5) 6.4 24.5 17.8
Source: Company, Karvy Research
Exhibit 21: Balance Sheet
YE Mar (Rs. Mn) FY16 FY17 FY18E FY19E FY20E
Cash & Cash Equivalents 175 170 364 621 1110
Trade receivables 1222 1352 1628 1626 1654
Inventory 1951 2162 2192 2486 2429
Loans & Advances 558 527 727 839 854
Investments 547 547 116 152 155
Net Block 5702 7691 7372 7034 7665
Other assets 22 4 73 76 78
Total Assets 10177 12454 12472 12836 13944
Current Liabilities 2111 2248 2744 2987 2979
Debt (Short term + Long term) 4453 5797 4825 4331 4721
Other Liabilities 229 208 208 208 208
Total Liabilities 6793 8253 7777 7525 7908
Shareholders Equity 455 480 480 480 480
Reserves & Surplus 2929 3721 4215 4830 5556
Total Networth 3384 4201 4695 5311 6036
Total Networth & Liabilities 10177 12454 12472 12836 13944
Source: Company, Karvy Research
12
Mar 19, 2018
Nandan Denim Ltd
Exhibit 22: Cash Flow Statement
YE Mar (Rs. Mn) FY16 FY17 FY18E FY19E FY20E
PBT 881 700 804 1001 1179
Depreciation 660 862 1149 1229 1413
Net Interest ow 378 338 490 434 480
Tax Paid (198) (272) (201) (250) (295)
Inc/dec in Net WC (273) 17 (12) (82) 11
Others 18 6 0 0 0
Cash ow from operating activities 1466 1650 2230 2331 2788
Inc/dec in capital expenditure (1821) (2844) (829) (891) (2043)
Others 21 25 405 (110) 21
Cash ow from investing activities (1799) (2819) (424) (1001) (2023)
Inc/dec in borrowings 590 1271 (972) (494) 390
Dividend paid (126) 0 (108) (105) (150)
Interest paid (396) (357) (531) (476) (519)
Others 250 250 0 3 3
Cash ow from nancing activities 318 1164 (1612) (1073) (277)
Net change in cash (15) (5) 194 257 489
Source: Company, Karvy Research
Exhibit 23: Key Ratios
YE Mar FY16 FY17 FY18E FY19E FY20E
EBITDA Margin (%) 16.5 15.6 16.9 17.5 19.8
EBIT Margin (%) 11.2 8.7 9.2 9.7 11.0
Net Prot Margin (%) 5.5 4.6 4.2 4.9 5.7
Dividend Payout Ratio (%) 13.7 17.8 18.0 18.0 18.0
Net Debt/Equity (x) 1.3 1.2 1.0 0.7 0.6
RoE (%) 21.2 14.9 13.6 15.0 15.6
RoCE (%) 21.7 15.2 17.8 19.1 20.5
Source: Company, Karvy Research
Exhibit 24: Valuation Parameters
YE Mar FY16 FY17 FY18E FY19E FY20E
EPS (Rs.) 13.9 11.8 12.5 15.6 18.4
DPS (Rs.) 1.9 2.1 2.3 2.8 3.3
BVPS (Rs.) 74.3 87.4 97.7 110.5 125.6
PE (x) 8.4 10.2 10.8 8.7 7.4
P/BV (x) 1.6 1.4 1.4 1.2 1.1
EV/EBITDA (x) 5.0 6.0 4.5 3.8 3.3
EV/Sales (x) 0.8 0.9 0.8 0.7 0.7
Source: Company, Karvy Research; *Represents multiples for FY16 & FY17 are based on historic market price
13
Mar 19, 2018
Nandan Denim Ltd
Stock Ratings
Absolute Returns
Buy : > 15%
Hold : 5-15%
Sell : < 5%
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