KPR Mill slips 9%, hits 52-week low as investors fret demand slowdown

With 24% correction in June, the stock of the garments & apparels maker has corrected 38% from its record high level of Rs 771.80

Shares of KPR Mill hit a 52-week low of Rs 479.60, slipping 9 per cent on the BSE in Tuesday's intra-day trade. The stock has fallen 24 per cent thus far in the month of June on cautious outlook. Global retailers have significantly trimmed down their profit projections, sighting raw material inflation and removal/reduction of stimulus, dampening the outlook.

With the recent correction, the stock of the garments & apparels maker has corrected 38 per cent from its record high level of Rs 771.80, touched on January 17, 2022. In comparison, the S&P BSE Sensex was up 1.7 per cent at 52,463 points at 12:05 PM.

That said, in the past one year, the market price of KPR Mill has zoomed 60 per cent as compared to 0.22 per cent decline in the Sensex on the back of strong earnings.

For the financial year 2021-22 (FY22), the company's profit after tax (PAT) jumped 63.38 per cent year on year (YoY) to Rs 842 crore from Rs 515 crore. FY22 revenue also grew 37.7 per cent to Rs 4,910 crore from Rs 3,566 crore in the previous fiscal.

Earnings before interest, taxes, depreciation, and amortization (ebitda) margin improved 230 bps to 26.6 per cent in FY22 from 24.3 per cent in FY21. Ths came even as March quarter ebitda margin contracted 90 bps to 23.8 per cent from 24.7 per cent in the year-ago quarter.

According to analysts at ICICI Securities, Indian home textile players witnessed a decline in market share in the US. Also, India's apparel export data in May 2022 has seen a receding trajectory.

"US is one of the key textile markets for India accounting for 50 per cent of home textile exports and 28 per cent of apparel exports. Hence, reduced purchasing power in key export markets would negatively impact order book of Indian exporters," the brokerage firm said in textile sector update.

Textile stocks have witnessed a significant rally in the past two years. However, the brokerage firm believes current headwinds could outweigh long-term structural story (expected free trade agreements with Europe/UK, PLI scheme, China+1) in the near term.

The brokerage firm further said that the recent event/news flow suggested that major US retailers (like GAP, Target and Walmart) were grappling with excess inventory issues owing to lower-than-expected demand and delayed deliveries due to port congestion resulting in seasonal and occasion specific products remaining unsold.

"The textile sector has good long term potential but we advise a cautious stance on the sector currently owing to near term headwinds. Hence, we downgrade the stocks from BUY to HOLD," analysts said, with a target price of Rs 635 on KPR Mill.