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Tuesday, 8 August 2017

Nitin Spinners - Potential Mulibagger of textile sector

Nitin Spinners: CMP: 122.5, P/E: 9.72, Industry P/E: 10.41, P/bv: 2.13, Dividend Yeild %: 0.82


About Company:

Nitin Spinners Ltd was incorporated as a private limited company on October 15, 1992 under the Companies Act 1956 in the state of Rajasthan having the name ‘Nitin Spinners Private Limited’. Subsequently the company was converted into a public limited company on November 15, 1994 and the name was changed to Nitin Spinners Limited. The company was promoted by R. L. Nolkha Dinesh Nolkha and Nitin Nolakha.
Starting with one open-end facility, the company has grown into one of the largest producers of 100% cotton yarn and fabrics in India. It possesses one of the best pool of skilled workforce in the textile Industry.

Nitin at present has an installed capacity of 27216 spindles, 1872 rotors and 15 knitting machines. Nitin is situated on N.H.No.79, Hamirgarh, 16 KM away from Bhilwara the textile city of Rajasthan in India. Its products are meant for apparel & garment industry, terry towels, knitted fabrics, denims, woven fabrics, furnishings, carpets, industrial fabrics, medical fabric etc. The company has tied up for long term yarn supplies with denim, terry towel, knitting and other Industrial fabrics manufacturers in India & abroad.
Its diverse competencies enable it to address the most challenging business realities effectively. This rich people capital has been manifested in its unmatched reputation, its wide product variety, its export exposure and above-the-market realizations.

The company has been an innovator in textile field and conducted its business with the purpose of growing into a notable organization. Today, despite in the midst of highly fierce and competitive textile markets, Nitin Spinners Ltd. is still poised to serve both local and international markets with a pledge of providing great satisfaction to its  customers. In an effort to finalize this vertical plan, there are plans underway to enter the apparels sector to complete the production chain from yarn to ready-to-wear garments.
Today, with the combined installed capacity of nearly 80000 spindles & 4000 rotors, manufacturing 25000 tons of yarn and threads per annum, the company has carved a niche for itself on the textile map of the country.
Its Fabric Unit has also shown an upward growth trend since its inception. Today, with the production & supply of 4000 tons of fabric per annum, its top quality fabric is already making its presence felt in the global textile industry.
The company is exporting cotton yarns and knitted fabrics to countries like Australia, Bahrain, China, Colombia, Egypt, Israel, Italy, Korea, Mauritius, Russia, Poland, U.K., U.S.A. and others. It supply to customers, who are in fields like apparel and garment industry, industrial fabrics, furnishing fabrics, towels, denims etc. At present, its exports are restricted to around 18-20 countries only, which leaves more scope for the company to develop new markets and to increase its presence accordingly. Further, with the phasing out of quota restrictions, the company is expecting to achieve high growth rate in the global markets in the coming years.

Product range of the company includes:
 
Yarns
  • Open End yarns from Ne 5/1 to Ne 30/1 ( Nm 8/1 to Nm 50/1 ) 
  • Multifold Open End Yarns
  • Ring Spun Combed Yarns from Ne 20/1 to Ne 50/1 ( Nm 34/1 to Nm 85/1) 
  • Multifold Ring Spun Yarns
  • 'S' & 'Z' Twist Yarns
  • Dyeable cheese cones - Soft package
  • 100% Organic Cotton Yarns and Blends
Knitted Fabrics
  • Single Jersey 
  •  Pique structures 
  •  Interlock structures
  •  Rib structures
  •  Three Thread Fleece 
Woven Fabrics

Achievements/ recognition: ISO 9001: 2000 accreted
Certificates from:
  • Organic Exchange
  • Export House
  • Bureau of Indian Standards
  • Oeko-Tex Standard
  • GOTS/Sustainable
 Fundamentals:  

Positive:

  • P/e is at only 9.72, lowest among peers
  • P/b is at 2.13 on among the lowest
  • Face value at Rs. 10 
  • Promoters Holding Increased and now at 64.28% with zero pledge
  • Regular dividend paying company but at 0.82%, median among peers
  • Sales growth is healthy and consistent at 20% YoY from last 10 years and 35% TTM
  • Compounded profit growth is also healthy and consistent at YoY 20% from last 10 Years and 29% TTM
  • ROE is too good and consistent at YoY  15% from last 10 years and 24% TTM
  • Debt / Equity is 2.0, although at higher side but most debt taken for capital expansion, which is at 100% on Years 2014 to 2015-16 
  • Company capital infusion YoY
  •  Available at 15% discounted price from 52Wk high
  • Current Ratio (x) is marginally good at 1.8
  • Quick Ratio (x) is good at 0.93
  • Interest Coverage Ratio (x) is good at 4.17
  • Return On Asset (%) is at 7% marginally o.k 
  • YoY increase of share capital 
  • Addition of tangible assets like Building, land, machinery YoY
Negative:

  • Although regular dividend paying but yeild is low at 1.82
  • Although the debt is used for capital expansion but its higher than share capital
  • Operating margins declining YoY from last 4 years (Median among peers)
  • Company having Contigent liabilities about 11cr. pretaining to tax, penalty and customs duty
  • Competitors like trident and welspun also strong YoY 
  • Raw material is completely depend upon  climatic conditions so any unknown consequences will effect the profitability
Key highlights:  

  • The company is one of the top manufacturer of 100% cotton and yarn fabrics in india
  • Its going to benefit from the GST implementation, in the textile sector as whole
  • Shift from unorganized to organized sector will benefit the company
  • The company management is good and the company received various awards for their achievements and excellence
  • Ace Investor Dolly Khanna holds more than 1% stake in the company
  • Vertical integration planning and entering to ready made garments will benefit the  company in long run.
  • Company exporting to more than 20 countries and planning to increase foot print
  • The Company has undertaken expansion project at an estimated cost of Rs. 290 Crores and it is also taking effective steps to bring down the cost of production and overheads. The Company is hopeful that these measures will yield good returns in future. 
  • Due to substantial capacity expansion in the previous year, the company has recorded highest ever  turnover of Rs. 766.87 Crores in current year against Rs. 616.47 Crores inthe previous year, an increase of 24.40%.
Conclusion:

By considering the financial performance, sector growth scope, new projects, new products, GST implementation, Experienced  management, We anticipate that NITIN SPINNERS LIMITED is a potential multibagger for the time horizon of 3-5 years.

1 comment:

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