Result Update

August 5, 2010
Rating matrix
Rating : Add Bombay Rayon Fashions (BOMRAY)
Target : Rs 277
Target Period : 12 months Rs 262
Potential Upside : 6% WHAT’S CHANGED…
PRICE TARGET………………………….……………Changed from Rs 238 to Rs 277
Key Financials
(Rs Crore) FY09 FY10E FY11E FY12E EPS (FY11E)………..………………………………. Changed from Rs 19.8 to Rs 21.0
Net Sales 1342.4 1614.8 2074.7 2524.8 EPS (FY12E)………………………………………... Changed from Rs 26.4 to Rs 27.7
EBITDA 321.3 387.5 493.8 627.5
RATING…………………………………….…………..…...Changed from Buy to Add
Net Profit 148.5 175.9 234.9 309.5

Valuation summary
Strong operational performance…
FY09 FY10E FY11E FY12E Bombay Rayon Fashions (BRFL) reported a better-than-expected
financial performance for Q1FY11. BRFL’s revenues have shown good
PE (x) 12.2 16.7 12.5 9.5
traction with impressive growth on the back of new capacities coming
Target PE (x) 12.9 17.6 13.2 10.0
EV to EBITDA(x) 14.4 12.2 9.0 8.0
on stream. BRFL reported its peak EBITDA margin during the quarter at
Price to book (x) 1.5 1.5 1.4 1.2
25.5%. In spite of a surge in depreciation and interest charges and lower
other income, BRFL reported its peak profitability at Rs 52.2 crore.
RoNW (%) 12.5 9.2 11.1 12.9
RoCE (%) 9.3 7.7 9.7 11.1 ƒ Robust operating performance
BRFL, on the back of new capacities, has been able to garner higher
sales volume. The company reported 49% YoY growth and 6%
QoQ growth in revenues to register its highest ever quarterly
Stock data turnover of Rs 502.7 crore. BRFL’s operating performance has been
Market Cap. Rs. 2931.7 Crore encouraging with the EBITDA margin improving by 180 bps YoY
Debt( FY09) Rs. 1715.5 Crore and 130 bps QoQ to 25.5%. Due to new capacities coming on
Cash (FY09) Rs. 31.4 Crore stream, depreciation has increased by 97% YoY while the interest
EV Rs. 4615.8 Crore cost has gone up by 48%. In spite of the surge in depreciation and
52 week H/L Rs. 278/80 interest expenses the company has been able to report a 40% YoY
Equity capital Rs. 111.9 Crore growth in net profit to Rs 52.2 crore due to a significant
Face value Rs. 10 improvement in the operating performance.
MF Holding 9.5% ƒ Revenue and profitability to accelerate
FII Holding 13.2%
BRFL’s revenue and profitability have shown a gradual improvement
Price movement
in the last four quarters on the back of new capacities becoming
operational. With a major portion of expansion capacities going on
5600 300
5400
stream in the near term, we expect the major impact of the
250
5200 expanded capacity to be visible from hereon and expect the
5000 200 revenue and profit growth to accelerate.
4800 150
4600 Valuation
100
4400 BRFL is trading at 9.5x FY12E earnings. With revenue growth driven by
50
4200 new capacities and improvement in the EBITDA margin, we expect
4000 0 BRFL’s net profit to register a CAGR of 32% over FY10-FY12E. We are
Oct-09 Jan-10 Apr-10 Jul-10 increasing its valuation multiple from 9x to 10x FY12E earnings with a
revised target price of Rs 277.
NIFTY Bombay Rayon Fashions Ltd
.

Analyst’s name
Exhibit 1: Performance Highlights (Standalone)
Bharat Chhoda
(Rs Crore) Q1FY11 Q1FY11E Q1FY10 Q4FY10 QoQ(Ch %) YoY(Ch%)
bharat.chhoda@icicisecurities.com
Net Sales 502.7 490.3 336.4 474.0 6.1 49.5
Dhvani Modi
dhvani.bavishi@icicisecurities.com EBITDA Margin (%) 25.5 24.5 23.7 24.2 130bps 180bps

Jehangir Master Depreciation 29.0 24.0 14.7 22.1 31.3 97.5

jehangir.master@icicisecurities.com Interest 31.0 28.0 21.0 27.0 14.7 47.6
Other Income 2.2 7.0 5.1 7.7 (71.4) (56.7)
Reported PAT 52.2 53.5 37.3 50.4 3.5 39.9
EPS (Rs) 4.7 4.8 4.3 4.5 3.6 8.9
Source: Company, ICICIdirect.com Research

ICICIdirect.com | Equity Research

 Bombay Rayon Fashions (BOMRAY)

Exhibit 2: EBITDA margin surges

26.0
25.1
25.5 25.5
25.0 24.4
In spite of the increase in raw material cost to sales ratio 24.3 24.2
24.5 23.9
from 50.4% in Q1FY10 to 52.5% in Q1FY11, BRFL has 23.7 23.8
been able to report a 180 bps improvement in the EBITDA 24.0
margin. This improvement was possible on account of 23.5
the reduction in employee cost to sales ratio from 11.5% 23.0 23.1
in Q1FY10 to 9.6% in Q1FY11. It was also due to lower 22.5
other expenses, which, as a percentage of sales, have 22.0
come down from 14.5% in Q1FY10 to 12.5% in Q1FY11 21.5
Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11

Ebitda Margin (%)

Source: Company, ICICIdirect.com Research

Exhibit 3: Garment sales volumes increasing

40 36.9
35 31.3
30
25
Million pcs

20
15
BRFL’s sales volumes for both fabric and garments have 9.9
grown consistently 10
5
0
FY09 FY10 Q1FY11

Garment

Source: Company, ICICIdirect.com Research

Exhibit 4: Fabric sales volumes

60 54.1

50 43.2
40
Million Mtrs

30
20.8
20

10

0
FY09 FY10 Q1FY11

Fabric

Source: Company, ICICIdirect.com Research

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 Bombay Rayon Fashions (BOMRAY)

Exhibit 5: Sales realisation

BRFL’s revenue growth has been mainly driven by strong
volume growth as realisation for both garment and fabrics
remained flattish.
300 267.5 270.0 273.3

250

200

150

Rs
112.9 113.7 112.0
100

50

0
FY09 FY10 Q1FY11

Garment Fabric

Source: Company, ICICIdirect.com Research

Exhibit 6: Quarterly net profit

60
BRFL has been able to improve its profitability for the last 50.4 52.2
five quarters. For Q1FY11, it reported its peak profitability 47.2
50
41.7 41.0
of Rs 52.2 crore 36.7 37.3
40 34.9 35.2
Rs Cr

30

20

10

0
Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11

PAT
Source: Company, ICICIdirect.com Research

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Bombay Rayon Fashions (BOMRAY)

Detailed valuation

BRFL is trading at 9.5x FY12E earnings. With revenue growth driven by

new capacities and improvement in the EBITDA margin, we expect
BRFL’s net profit to register a CAGR of 32% over FY10-FY12E. We are
increasing its valuation multiple from 9x to 10x FY12E earnings with a
revised target price of Rs 277.

Exhibit 7: Revenues and profitability to improve

3000.0
2524.8
2500.0
2074.7
Accelerated revenue growth and stable margins would
2000.0 1614.8
enable BRFL to improve its profitability in FY11E and
1342.4
FY12E 1500.0
1000.0
387.5 493.8 627.5
321.3
500.0 175.9 234.9 309.5
148.5
0.0
FY09 FY10E FY11E FY12E

Net Sales EBITDA Net Profit

Source: ICICIdirect.com Research

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 Bombay Rayon Fashions (BOMRAY)

ICICIdirect.com coverage universe

Sales (Rs.
Bombay Rayon Crore) EPS (Rs.) PE (x) EV/EBITDA RoNW(%) RoCE (%)

Idirect Code BOMRAY CMP (Rs.) 262 FY10E 1614.8 15.7 16.7 12.2 9.2 7.7
Target (Rs.) 277 FY11E 2074.7 21.0 12.5 9.0 11.1 9.7
MCap 2185.7 Upside (%) 6 FY12E 2524.8 27.7 9.5 8.0 12.9 11.1
Sales (Rs.
Kewal Kiran Crore) EPS (Rs.) PE (x) EV/EBITDA RoNW(%) RoCE (%)
Idirect Code KEWKIR CMP (Rs.) 375 FY10E 169.9 26.4 14.2 7.7 18.6 24.2
Target (Rs.) 354 FY11E 191.1 31.7 11.8 7.1 20.0 24.9
MCap 303.3 Upside (%) -6 FY12E 220.3 35.4 10.6 6.3 18.9 24.4
Sales (Rs.
JBF Industries Crore) EPS (Rs.) PE (x) EV/EBITDA RoNW(%) RoCE (%)
Idirect Code JBFIND CMP (Rs.) 140 FY10E 4944.4 28.9 4.8 4.5 23.7 18.0
Target (Rs.) 156 FY11E 5470.0 34.4 4.1 3.8 22.8 19.1
MCap 871.4 Upside (%) 11 FY12E 5896.7 39.1 3.6 3.4 21.1 18.9
Sales (Rs.
Alok Industries Crore) EPS (Rs.) PE (x) EV/EBITDA RoNW(%) RoCE (%)
Idirect Code ALOTEX CMP (Rs.) 21 FY10E 4314.7 3.1 6.8 7.0 8.9 8.0
Target (Rs.) 22 FY11E 5230.5 3.6 5.8 5.9 9.5 9.2
MCap 1611.0 Upside (%) 6 FY12E 5924.2 4.4 4.7 5.3 10.8 10.3
Source: ICICIdirect.com Research

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 Bombay Rayon Fashions (BOMRAY)

RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Add, Reduce, and Sell. The performance horizon is two years unless specified and the
notional target price is defined as the analysts' valuation for a stock.

Strong Buy: 20% or more;

Buy: Between 10% and 20%;
Add: Up to 10%;
Reduce: Up to -10%
Sell: -10% or more;

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
7th Floor, Akruti Centre Point,
MIDC Main Road, Marol Naka
Andheri (East)
Mumbai – 400 093

research@icicidirect.com

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