Denim demand rising in India as more youth jump into jeans bandwagon

Listen to the Jeans song

Suryalakshmi Spinning Mills - Latest Results

(in Cr.)
Sep-11
Jun-11
FY09-10
Revenue
171.98
165.64
416.74
Net Profit
6.7
9.62
4.35
EPS
5.02
7.2
3.25
Cash EPS
9.48
11.56
18.75
OPM %
12.22
15.16
12.13
NPM %
3.9
5.8
1.04
Suryalakshmi Spinning Mills - Latest Results

Suryalakshmi Spinning Mills - Share Price Movement

 
 
 
Weekly H/L
59
45.7
Monthly H/L
59.45
44.1
52 Weeks H/L
129.35
44.1
 
( 4 Jan 11 )
( 13 Dec 11 )
Delivery / Var+ELM %
60.61
30.98
 
 
 
Suryalakshmi Spinning Mills - Share Price Movement

Denim demand rising in India as more youth jump into jeans bandwagon

Suryalakshmi Spinning Mills - share price movement
Suryalakshmi Spinning Mills - share price movement | Source

Denim demand rising in India as more youth jump into jeans bandwagon


Website shows only 2009-10 results

Suryalakshmi Spinning Mills has seen its net profit slump inspite of revenue going up in the second quarter of the current year ended 30.09.11 as compared to the first quarter ended 30.06.11. Total revenue increased from Rs.165.64 crore to Rs.171.98 crore. Revenue for the full year 2009-10 was at Rs.416.74 crore. Net profit decreased from Rs.9.62 crore to Rs.6.70 crore. Net profit for the whole year 2009-10 was at Rs.416.74 crore. When I visited the BSE website, the company’s results showed the full year’s figures for 2009-10 and not 2010-11. I do not know the reason for it. Either the company would not have filed the audited annual results for 2010-11 with the BSE authorities or else the website is showing an error. But there is no error in the website as I cross checked with newspaper reports which also showed a net profit of Rs.4.35 crore for the company for the year 2009-10. Therefore there is something wrong in filing of the results for the year 2010-11. Maybe the company would have filed but BSE has not updated its website.

Denim attracts youth

Suryalakshmi Cotton Mills’ operating profit margin declined from 15.16% in Q1 to 12.22% in Q2. Net profit margin declined from 5.80% to 3.90%. The company wants to expand its operations at an investment cost of rs.285 crore. Suryalakshmi Cotton Mills manufactures denim garments. Apart from expanding its spinning capacity, the company wants to set up a 25 MW thermal power plant in Nagpur in Maharashtra State. The company has an existing capacity of 60000 spindles. It wants to add another 50000 spindles in two phases. The company foresees a 10% growth in the denim market in India in the next few years. Young boys and girls are addicted to wearing jeans pants and shirts. Denim market is expanding in India. At present Indian denim market is estimated at around 420 million metres per year. There are twenty companies in the fray in the denim market. The market is dominated by top players like Raymond and Arvind. The existing players produce around 620 million metres of denim every year. Out of this nearly 200 – 220 million metres are exported.

Capacity expansion

Suryalakshmi Cotton Mills will add 25000 spindles capacity in the first phase of its expansion in Andhra Pradesh State at an investment cost of Rs.80 crore. The first phase expansion is expected to be completed in about a year’s time. Paritosh Agarwal is the Managing Director of Suryalakshmi Cotton Mills. The company will add another 25000 spindles capacity in the second phase of its expansion at an investment cost of Rs.80 crore. The company has made financial closure for the first phase of its expansion with 50% of the amount coming through debt.

Supplying to world class denim apparel producers

Suryalakshmi Cotton Mills’ Ramtek plant near Nagpur has a denim capacity of 40 million metres per annum. The company will add another 4 million metres capacity per annum. Suryalakshmi Cotton Mills exports 50% of its denim production to major brands in Europe and USA like Tesco, Wal-Mart, Sainsbury and NEXT. As the power cost is very high in Nagpur, Suryalakshmi Cotton Mills is setting up a captive thermal power plant with capacity 25 MW at an investment cost of Rs.125 crore. The power plant will start producing power during the first quarter of 2012.

Prices soften

As the cotton prices have come down of late due to overproduction, denim prices are expected to soften in the market in the next few months. Denim prices were ruling at Rs.170 per metre in the month of May this year. It is expected to drop to around Rs.155 per metre and maybe even below Rs.150 per metre. Suryalakshmi Cotton Mills will have to reduce the price of its denim apparels.

25% dividend

For the fourth quarter ended 31.03.11, the company’s net profit was at Rs.7.81 crore. This was a nearly 90% increase over the figure of Rs.4.12 crore in the corresponding period of the previous year. But net profit dropped to Rs.6.70 crore for the quarter ended 30.09.11 showing pressure on margins. For the year 2010-11, net profit of the company increased to Rs.34.80 crore from Rs.4.35 crore in the corresponding period of the previous year. Suryalakshmi Cotton Mills paid a dividend of 25% for the year 2010-11.

Good investment for medium and long term

In view of the good performance of the company even in the midst of a depression in the textile industry, investors can acquire the shares of Suryalakshmi Cotton Mills at the current market price of Rs.48.35 (BSE 30.12.11). The highest price recorded by the shares of Suryalakshmi Cotton Mills in the last one year is at Rs.129.35 (04.01.11) and the lowest price is at Rs.44.10 (13.12.11). One may acquire the shares for medium and long term investment.

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