What are you doing with this stock? Kitex Garment came out with negative Q2 results few days back, and we received many emails in regards to our view on this company. We hold Kitex Garments stocks in our fund and also we recently added in our portfolios that we share with you on monthly basis.

Kitex Garment’s total income from operations for quarter had fallen down by 20.32% to Rs 106.97 crore on QoQ basis. Earnings before taxes for the quarter stand at Rs 21.66 crore down almost 48.49% on QoQ basis and net profits at Rs 12.92 crore for the quarter, down by 52.43%.

This is how the half yearly results look like:

Kitex Garment 1H – 2017 % 1H – 2016 % % Difference
Revenues 226.28 100% 243.33 100% -7%
EBT 53.98 23.86% 67.87 27.89% -20.47%
Net Profits 33.80 14.94% 43.13 17.72% -21.63%

 

So what went wrong this quarter? Mr Jacob mentioned that they are holding inventory of Rs 34 crore because their customers did not want to hold much inventory due to US election. He also was confident to achieve growth of 20% in this financial year and expects Q4 to be the strongest quarter for this financial year. Mr Jacob also expects to add another 7 – 8 new clients next year and they are also in talks with Coles and other super market chains.

We do not see this negative results as permanent structural damage to its business. Elections in the US won’t be again in the next quarter!

So far we also haven’t seen any changes from the analysts who follow this business. They still expect Kitex Garment to report profits in range of Rs 130 crore – Rs 158 crore for this financial year and Rs 150 crore – Rs 203 crore in the 2018 financial year. This transpires its valuation spectrum as per our calculation for 2017 financial year in range of Rs 317 – Rs 468 per share and Rs 317 – Rs 565 per share for the 2018 financial year.

So did you missed out on buying this stocks when they fell down to Rs 428?

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we tell you to take professional advice before going ahead with our views.