Recommendation From Textiles Sectors

This section gives a recommendation of a stock having stock margin padding price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon

Filatex India Limited 

BSE Code: 526227
CMP: Rs 62
FV: Rs 2
BSE Volume: 368,89



WEAVING THE FABRIC OF GROWTH 

HERE IS WHY Diversified product portfolio Integrated operations Low operating costs 

Filatex India Limited (FIL) is engaged in the manufacturing and trading of synthetic yarns and textiles. It manufactures polyester and polypropylene multi-filament yarn and polyester chips. 

On the quarterly front, the revenue from operations climbed to Rs 718.33 crore in Q2FY19 from Rs 414.43 crore in Q2FY18, thereby posting an impressive growth of 73.32 per cent. EBITDA stood at Rs 64.84 crore in Q2FY19 as against Rs 36.08 crore in Q2FY18, thereby rising 79.71 per cent. Net profit rose to Rs 20.25 crore in Q2FY19 from Rs 13.52 crore in Q2FY18, registering an increase of 49.77 per cent. The basic EPS improved to Rs 0.93 in Q2FY19 from Rs 0.62 in Q2FY18. 

During the quarter, yarn production was up 44 per cent YoY, while chips production surged 90 per cent YoY. The company's exports rose to Rs 84.31 crore in Q2FY19 from Rs 80.22 crore in Q2FY18, posting a growth of 5.1 per cent. 

On the consolidated annual front, the net revenue from operations rose to Rs 1,928.04 crore in FY18 from Rs 1,551.01 crore in FY17, thereby rising 24.30 per cent. Its EBITDA stood at Rs 156.96 crore in FY18 in comparison to Rs 133.17 crore in FY17, registering a growth of 17.86 per cent. PAT stood at Rs 60.05 crore in FY18 as against Rs 40.53 crore in FY17, posting a growth of 48.16 per cent. 

The basic EPS rose to Rs 13.73 in FY18 versus Rs 10.20 in FY17. Net cash generated from operations surged to Rs 187.6967 crore in FY18 as against Rs 66.5870 crore in FY17, posting a growth of 181.88 per cent. 

FIL’s net worth and enterprise value stood at Rs 384.75 crore and Rs 1,393.20 crore, respectively; while its total debt amounted to Rs 710.79 crore. The company reported ROA of 4.79 per cent, while ROE and ROCE stood at 16.84 per cent and 13.99 per cent, respectively. FIL reported an adjusted P/E multiple of 11.85x and EV/EBITDA multiple of 8.31x.

The scarcity of arable land and high prices have stagnated the demand for natural fibres, which are being replaced by the more affordable man-made fibres. 

FIL is leveraging on this opportunity by enhancing its production of top quality, cost-effective yarns. The cost of raw materials as a percentage of sales has dwindled each year over the last three years. 

FIL is expanding capacities to accommodate demand on the domestic front as well as for its exports business. Despite subdued demand for traditional spinning and yarns combined with rising cotton prices, FIL outperformed the textile markets in terms of growth. 

FIL is focused on enhancing higher margin product range and improving capacity utilisation. Increasing per capita income, rapid urbanisation, government incentives, rationalised tax structure and increasing exports are major growth drivers. Despite intensifying competition, FIL has fared well on the back of consistent product quality and low operating costs. By virtue of these factors, we recommend our readerinvestors to BUY this stock.

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