Shri Lakshmi Cotsy

Rating: Buy

Price: CMP Rs 101 T: Rs 152
Brokerage: Asit C Mehta

Date: June 12, 2008

The Kanpur-based textiles firm is undertaking a three-phase expansion to hike capacity as well as foray into new segments. Shri Lakshmi Cotsyn is setting up a new garments facility, which will commence operations next fiscal. It also aims to focus on technical textiles, which fetch higher realizations. The company plans to also venture into the retail segment to move up the value chain, It will open 500 exclusive brand outlets in two years. Going forward, Shri Lakshmi Cotsyn’s top line should grow at a CAGR of 31 per cent to Rs 1,453.3 crore in FYi OE and its bottom line at 40 per cent CAGR to Rs 111.3 crore. At Rs 101, the stock is trading at a PE of 3.6x its FYO9E earnings and 2.6x its FY1OE earnings. The new garment facility and its foray into the high margin ready-to- wear segment will help the company improve its margins by 300bps from 13.7 per cent in FY07 to 16.7 per cent in FYi OE, the analyst says.

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