ALOK INDUSTRIES--BUY

-
November 12, 2011:
A varied product mix, backward integration, strong export standing and low valuations make the stock of Alok Industries a good bet in the textile space for investors with a 2-3 year perspective. At Rs 20, the stock trades at four times trailing four-quarter earnings, at a steep discount to closest comparable Bombay Rayon Fashions.
Ranged presence: Over the past two years, Alok has gradually brought polyester yarn into its product offering to diversify out of its cotton concentration. In international markets, man-made textiles have a stronger presence than natural fibres such as cotton. In the first six months of this financial year, polyester accounted for as much as 36 per cent of revenues. It also deepened product lines; for instance, it introduced terry towels in the home textiles segment. Alok's product range includes apparel fabric, garments, home textiles, and polyester and cotton yarn.
Alok derives about a third of sales from exports. While the biggest consumer markets of the US and Europe are troubled, Alok's large capacities serve it well. As global retailers look to contain costs, they may consolidate suppliers and source more from fewer vendors. Those able to ramp up production to meet higher demand could thus benefit.
During the previous recessionary phase, Alok had been able to grow exports by virtue of its capacities. In the six months ended September 2011, exports have expanded a healthy 28 per cent. As fresh capacity expansion across product categories comes on stream by the end of December, revenues could see better growth. It also plans to deepen presence in domestic retail; however, with its franchise route of expansion, extensive capital will not be required. Further, retail accounts for less than one per cent of revenues.
Debt and interest: Revenues for the first half of this financial year have grown by 48 per cent, helped by price and volume growth. Operating margins stood at 26 per cent, down from the 29 per cent in the year-ago period on a higher contribution of low-margin polyester in revenues. With prices of inputs such as cotton cooling off over the past several months, the earlier margin pressures from material costs have lightened. Backward integration into spinning of yarn has also helped it record better margins than peers.
However, with debt-equity at 3.1 times, interest costs have hurt Alok. Net profits grew by 10 per cent for the first half of this financial year; interest outgo rose 35 per cent during this period. Still, some of the debt comes under government schemes which have long repayment periods. It has also begun to dispose of its real estate, raising about Rs 100 crore thus far. It aims to collect about Rs 1,400 crore through such sales by the end of 2012 which will significantly reduce interest burden.

Popular posts from this blog

IOB capitalises on hike in stake by LIC

-
Indian Overseas Bank rose 1.53% to Rs 46.45 at 10:31 IST on BSE, after the biggest domestic instutional investors Life Insurance Corporation of India hiked its stake in the state-run bank. The bank made this announcement after trading hours on Wednesday, 25 March 2009. Meanwhile, the BSE Sensex was up 126.19 points, or 1.31%, to 9,794.09. On BSE, 31,003 shares were traded in the counter. The stock had an average daily volume of 1.93 lakh shares in the past one quarter. The stock hit a high of Rs 47 and a low of Rs 45.95 so far during the day. The stock hit a 52-week high of Rs 156.80 on 2 May 2008 and a 52-week low of Rs 37.55 on 9 March 2009. The mid-cap bank stock had underperformed the market over the past one month till 25 March 2009, falling 3.17% as compared to the Sensex's 8.60% rise. It had also underperformed the market in the past one quarter, declining 33.94% as compared to the Sensex's 1.04% rise. The bank's current equ The current price of ...
Read more

Lok Housing & Constructions builds on fund raising plans

-
Lok Housing & Constructions jumped 6.99% to Rs 107.90 at 11:20 IST on BSE ahead of a board meeting to consider fund raising options from both foreign and local market, including an institutional placement. Meanwhile, the BSE Sensex was down 50.50 points, or 0.30%, at 15203.73. On BSE, 1.86 lakh shares were traded in the counter. The scrip had an average daily volume of 4.74 lakh shares in the past one quarter. The stock hit a high of Rs 115 and a low of Rs 102 so far during the day. The stock had a 52-week high of Rs 390.50 on 1 January 2008 and a 52-week low of Rs 96.25 on 12 June 2008. The scrip had underperformed the market over the past one month till 12 June 2008, falling 26.55% compared to the Sensex's 10.18% decline. It had also underperformed the market in the past one quarter, falling 31.39% compared to Sensex's 3.24% fall. The small-cap housing projects developer has an equity capital of Rs 42.88 crore. Face value per share is Rs 10. The current...
Read more

economic times picks

-
CMP: Rs 70.50 Target Price: Rs 90 CLSA Asia-Pacific Markets maintains an 'outperform' on Jagran Prakashan, with a 12-month price target of Rs 90. "An economic slowdown notwithstanding, improving literacy and income levels in Hindi heartland imply that drivers for Jagran's growth are still in place. With a 35% ad rate hike in 2008, Jagran continues to narrow the gap with its more expensive English rivals," the foreign brokerage said in a client note, after a Q&A reply from the management. "Rising newsprint prices have made Jagran cautious on launching new editions in FY09 and its focus this year will be profitability. While management has budgeted for a minor increase in FY10 newsprint prices, it believes that prices are likely to peak in Q2FY08 and decline thereon," it added. Neyveli Lignite CMP: Rs 117.15 Target Price: Rs 160 MERRILL Lynch has maintained its 'neutral' rating on Neyveli Lignite, with a price target of Rs 160 ...
Read more