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Kitex Garments- Different People, Different Opinions

Kitex Garments is one of the most hyped stocks in Indian Market for the last one year. It has been a 10 bagger for people who invested in it one year before. This June 2015 quarter result was not able to meet the expectations of the investors and Kitex Garments has responded to it. From an all time high of Rs. 1070,it has nosedived to Rs. 754 today. Now the interesting factor is people from different corners are coming up with different opinions. Our “Master Portfolio Member” Porinju Veliyath is on first place to attach the stock, pointing on its high valuations.

Porinju Veliyath attacks Kitex Garments
On July 21, Porinju Veliyath blasted on Kitex with an interesting tweet- 

“If you want ‘great looks’, create a portfolio of Page, Kitex, Kavery Seeds, Bosch, MRF, Symphony, Sun, TCS etc. for 0 return in next 3 yrs!”

Again he continued
“Not to get excited with correction in Sun Pharma, Page, Kitex etc.. These fancied stocks discounts the earnings of next many years already!”

On July 22, he again attached Kitex Garments along with giving publicity to his new entry to another textile company, Gokaldas Exports
“NewGen Investors feel safe to buy Kitex at 4200 Cr; they have 20 reasons not to look at Gokaldas Exports at 200 Cr, due to current problems!”

Porinju again gave a “non so innocent comment”, who knows he is pin pointing some ‘moat’ investor in town 🙂
“I have been warning ‘new investors’ for last few months, about investing in over-fancied, high PE stocks with ‘moat’, at irrational prices”

Kitex Garments is a High Conviction Bet, says Professor Sanjay Bakshi

Meanwhile, Professor Sanjay Bakshi exclaimed MD of Kitex Garments, Mr Sabu Jacob as intelligent fanatic!!. He pointed out as below
“Sabu runs one the most profitable infant garment manufacturing companies in the world called Kitex Garments which has no net debt, earns a ROE of  63% and yet sells garments to  giants like Carter’s, Gerber, ToysRUs, Wal-Mart, Mother Care, and The Children’s Place.  How can someone who sells to Wal-Mart earn so much? One answer is that a Wal-Mart or a  Gerber or a Carter’s or a Children’s Place don’t ever again want their customers to see  images like this, right next to the labels of  their garments.”

We feel that Professor Sanjay Bakshi became a fan of Sabu Jacob and he foresees bright future for Kitex Garments. Read his words –

“In my view, Sabu is a very good human being. He employs 4,000 workers, pays them  above market wages, and houses them in dorms. He provides them with nutritious food, an  air-conditioned garment factory which satisfies the most stringent quality and social  compliance standards of  the western world.
His garments use the best quality materials and yet he an sell them to his clients at an  average price of  less than $1. There are only 12 companies in the world which have the  capability Kitex has and Sabu is determined to become #1. Right now, he is at #3 position.”

Buy Call by Motilal Oswal on July 22 @ Rs. 839
The report says that the revenue of Kitex Garments is about to double in next 3 years.
“With foray into the brands business, we expect strong 20% revenue CAGR along with 400bp margin expansion, driving 34% PAT CAGR over FY15-17. Capital expenditure
over the next three years will be limited to INR0.4b-0.5b, thus resulting in significant free cash generation. With huge scalability, strong return ratios and free cash generation, we believe KTG deserves a multiple of 26x one-year forward. We maintain Buy with a target price of INR970, valuing the stock at 26x FY17E earnings.”

Lets wait and see who will have the last smile!!!

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