Indian textile industry accounts for nearly 13 per cent of its total exports. It contributes 14 per cent to the country's entire industrial production and 4 per cent to the GDP as per India Brand Equity Foundation (IBEF). Right now, there is 100 per cent FDI approved in the sector.

Pioneer Embroideries (PEL) is one of India’s largest manufacturer and exporter of embroideries, laces and dope dyed yarn. The manufacturing facilities are located at Sarigam (Gujarat), Naroli (Dadra & Nagar Haveli), Coimbatore (Tamil Nadu), Kala-amb (Himachal Pradesh). It exports its products across North America, Latin America, Europe, Middle East and Africa. PEL has around three lakh designs of embroidery and lace products fulfil the varied requirements and preferences of the clients.

On financial front, PEL’s consolidated topline has decreased by 5.96 per cent to Rs 255 crore in FY16 as compared to previous financial year. The company has faced reduction in topline due to a substantial drop in raw material mostly crude oil prices for the yarn business. Its EBITDA declined by 14 per cent to Rs 21.52 crore in FY16 on yearly basis as competitive pricing pressure increased. PEL’s EBITDA margin contracted by 85 basis points to 8.43 per cent in FY16 as compared to previous fiscal year. The company’s net profit boosted almost three times to Rs 17.38 crore in FY16 on yearly basis. Its net profit margin expanded by 454 basis points to 6.8 per cent in FY16 as compared to previous fiscal year.

On geographic segmental revenue front, PEL earned 82 per cent from domestic segment and 18 per cent from export segment in Q1FY17. On activity based revenue front, the company has earned 76 per cent from dope dyed yarn and 24 per cent from embroidery and laces in Q1FY17.

PEL’s debt to equity ratio has been reduced from 1.22x times in FY15 to 1.14x times in FY16. The debt resolution with all lenders, which were part of its CDR scheme earlier, continued during the year. The total secured borrowings stood at Rs 76.10 crore in FY16 substantially lower than previous years.  Its ROCE and ROE stood at 13.61 per cent and 24.93 per cent in FY16 respectively.

On latest quarter front, PEL’s standalone revenue increased 2.92 per cent to Rs 60.91 crore in Q1FY17 as compared to same period in previous financial year. However, the company’s EBITDA declined by 8.38 per cent to Rs 4.19 crore in Q1FY17 on yearly basis. It posted net profit of Rs 2 lakh in Q1FY17 against net loss of Rs 1.58 crore in Q1FY16.

On valuation front, PEL’s share price is trading at 8.98x times as compared to industry PE multiple of 12.44x times which is quite attractive enough. The company’s PE multiple is quite lower against peers such as DCM (36.77x) and Trident (13.51x). Considering the numbers accessible and our detail analysis on the basis of the same, we recommend our reader-investors to BUY the stock.