Kewal Kiran Clothing rallied over 400% in 3 years; is there more rally ahead?
The shares, which were priced at ₹153.30 apiece three years ago, have seen a meteoric rise of 417% to trade at the current market price of ₹792. If an investor invested ₹1 lakh in the shares at that time and remained invested until the present day, the wealth would have grown to a staggering ₹5.16 lakh.
The stock gained significant momentum in CY21, registering a rally of 41.48% after experiencing four consecutive years of underperformance from CY16 to CY20. Considering the stock’s all-time low of ₹19 per share, it has skyrocketed by 4068% to date.
Kewal Kiran, primarily focused on menswear, has built a strong portfolio of brands, including Killer, Integriti, and Lawman. The flagship brand, Killer, stands among the top denim brands, positioning itself alongside global counterparts like Levi’s, Lee, and Pepe in the consumer’s perception, according to the brokerage.
For the September quarter, the company delivered an impressive all-around performance. Its revenues grew 16% YoY (12% 4Y CAGR), led by a 9% YoY improvement in volume (from apparel), while realisation improved by 6% YoY to ₹995 despite a lower contribution from jeans.
The company reported a record quarterly net profit of ₹50 crore in Q2 FY24. In the same quarter of last year, the company recorded a net profit of ₹39 crore.
Following the company’s Q2FY24 earnings, domestic brokerage firm ICICI Securities retained its ‘buy’ call on the stock and lifted its target price to ₹850 apiece from ₹830.
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Earlier in July, Antique Stock Broking initiated coverage on the stock with a ‘buy’ rating and set a target price of ₹805 per share. The brokerage points out that the company has been focusing on a new range of products like shirts and t-shirts, jackets, the winter wear segment, and athletic wear.
The company’s overall aim is to leverage the brand visibility of its already established labels and create a market for its new products. The brokerage believes that the brand and category extensions will reinforce its core positioning and provide it with new avenues for growth.
The brokerage said the company is strategically focused on expanding its retail presence across a diverse spectrum of distribution channels. Currently, the company boasts a wide distribution network encompassing over 3,000 multi-brand outlets (MBO), large format stores (LFS with 2,000+ counters), 453 exclusive brand outlets (EBO), and various e-commerce platforms.
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With a particular emphasis on the Killer and Integriti brands, the company is gearing up to accelerate its EBO expansion. The brokerage highlights that a significant portion of this expansion will occur through the asset-light franchise-owned franchisee-operated (FOFO) model. The company aims to add 80–100 EBOs annually, translating into a 20% CAGR expansion from FY23–25E, it added.
The brokerage underscores the company’s solid position as one of the select branded apparel entities boasting a positive free cash flow and a robust balance sheet.
“Going ahead, management is open to shifting to the SOR model in case the competitive scenario intensifies. Kewal Kiran is an underleveraged company with a net cash of ₹1.2 billion and an efficient working capital cycle of 195 days in FY23. RoE and RoCE are healthy at 22% and 27%, respectively,” said Antique Stock Broking.
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