Alok Industries
CMP 22/-
Alok Industries is one of the largest & fully integrated textile manufacturers in the country, with widest product portfolio [from Cotton & Polyester yarn, grey, Fabric, Home textiles, Apparel fabric, to Garments] catering to host of segments. It mainly caters to domestic markets [65%] while rest is exported. Company's main focus is on value added products and retail [it is expanding its retail H&A outlet network to 1000 in 2 years].
The order book is full for next 4 months at Rs 900crs including Home textiles order book which is full for the whole year. This offers revenue visibility for the second half of this FY.
There are many capacity additions done by the company during the year and range of products is being increased everyday. All kind of fabrics and garments are being produced. They are currently at 75% utilization level and expect to increase to 80% by next year and more going forward.
Another worry company will address is reduction in high debt levels, which will help reduce the risk and increase their bottom line. This they will do by rising cash by - listing retail UK subsidiary and by selling of property in Mumbai.
The industry outlook is good and is expected to improve further as after de-stocking of last year, most of the big global retailers are placing fresh orders in big way. Increasing utilization levels and completion of expansion plans will fetch increased revenues going forward and drive growth in earnings.
As their expansion phase is almost complete, so operations will show net cash flows from FY11.
Management is making efforts to improve the margins in domestic as well as global sales and volumes are growing, so cash generation will take care of high debt which will come down gradually.
With cash EPS for current year, close to 10/-and EPS around Rs 4/-, we expect this highly liquid stock to reach levels of 30-35 in next 6-12 months. BUY.
