Khadim India's Q4FY18 results (Outperformer) - In line results... revenue growth to accelerate!
Q4FY18 result highlights
- Khadim 4QFY18 results were largely in line with expectations. Net sales increased by 31% yoy to Rs 1.96bn. EBITDA increased by 20% yoy to Rs 178m, PBT increased by 48.6% yoy to Rs141m. PAT declined by 1.5% yoy to Rs102m.
- Retail business revenues increased by 19% yoy while distribution business sales increased by 44% yoy. The quarter also had institutional sales of Rs 219m versus Rs75m in the base quarter.
- Gross margins declined by 220bps yoy due to inferior mix and higher discounting days as compared to the base quarter.
- Staff cost and other expenses grew by 24% yoy each. However, EBITDA margins declined by lower rate of 90bps yoy to 9.1% given the positive impact of operating leverage.
- Interest cost declined by 42% yoy while other income was up 35% yoy resulting in PBT growth of 48.6% yoy. However reversal of tax provision in base quarter resulted in PAT declining by 1.5% yoy.
Key positives: Healthy growth in Retail & Distribution business
Key negatives: Lower gross margins, Higher other expenses.
Impact on financials: Our earnings estimates remain unchanged.
Valuations & view
The quarter’s performance is a reflection of the growth rates that Khadim can clock across different channels. We believe the company will continue to drive revenue growth through a mix of store/distribut0r expansion as well as healthy same store / same distribut0r growth. We are factoring 15.7% revenue CAGR over FY18-20E. Further, improving segment margins through better mix and operating leverage will drive a 21% EBITDA and a 29% earnings CAGR over the same period. With the stock trading at 23xFY20E earnings, we believe continued strong execution will drive an earnings multiple re-rating. Maintain Outperformer.
Khadim India Limited is an India-based footwear retail company. The Company is primarily engaged in the business of manufacturing and retail business of footwear, leather accessories and other lifestyle products. The Company offers leather and non-leather sandals, slippers, boots, ballerinas, stilettos, moccasins and sports shoes. The Company offers various categories of footwear, including Hawai, poly vinyl chloride (PVC), ethylene vinyl acetate (EVA), polyurethane (PU), direct injection process (DIP), stuck on and school shoes under the Khadim's brand. The Company offers its products under the brands, such as Pro, Lazard, Softouch, Cleo, British Walker, Turk, Sharon, Bonito and Adrianna.
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