Damodar Industries Limited – Multibagger Holi Dhamaka Research Report | Stocks to invest in 2018 | IndiaNotes.com
Damodar Industries Limited (NSE: DAMODARIND) (BSE: 521220)
• Damodar Industries Limited (Damodar), incorporated in 1987, a Damodar Group company was established with the main object tomanufacture synthetic blended yarns by setting up a unit at Daman for twisting and doubling of synthetic yarn, only to become one of the largest fancy yarn manufacturing brand.
• Damodar started with a philosophy to provide a novelty product at an affordable price. Passion for yarn made the company a trendsetter in the industry. As a result, Damodar becomeone of the first in industry to offer blended–fibre and novelty yarns at popular prices.
• The core products include Cotton yarn, Fancy yarn, Blended Fancy Yarn, Product Enquiry, Spun yarn, etc. Along with that, Damodar constantly looks all over the world to find ideas for new yarns, colours and designs. Each Damodar yarn has its own personality and is designed in variety of combinations that is appropriate to its texture and its use
• At present, Damodar is engaged in spinning, draw–texturizing, air–texturizing, fancy doubling and yarn dyeing, having in–house manufacturing operations. Its ring spinning plant produces high quality yarns enriching the aesthetic value through slubs, neps, injected slubs, multicolour effects and grindle effects. At the same time, Damodar is opening offices in various textile markets of the country to improve business.
With average wage rates being 50-60% lower than that in developed countries, India gets benefit from global outsourcing trends in labor intensive businesses such as garments and home textiles.
Rising per capita income, favorable demographics, shift in preference to branded products, favorable trade policies, superior quality exports and also rising government focus are favorable policies to support the industry gives huge opportunity.
Design and fashion capabilities are key strengths that enable Indian players to strengthen their relationships with global retailers and score over their Chinese competitors.The industry is investing in technology and increasing its capacities which should prove a major asset in the years to come.
World leader in Textile industry, China is currently carrying high cost cotton inventory effecting a change in its cotton policy, rising cost of production and net margins are low for Indian textile industry.
Import of second-hand textile machineries is hitting the local textile industry.
In Textile industries in India casual workers constitute over 90% of the labour force, resulting in a shortage of skilled workers at the national level. A significant proportion of workers are illiterate or less educated workers need the formal training system.
• Industry Overview:With the rise of strong textile exports over the last three decades, India is today among the leading producers of textiles in the world. India’s growing middle Income group population has been a key driver of textile consumption growth in the country. Changing lifestyle, rising incomes and increasing demand for quality products are set to fuel demand for Indian Textile products across the globe.Textile sector contributes 14% of industrial production, 4% of India’s GDP and 15% of the country’s export earnings.India’s cotton production, during the crop year 2016-17, is estimated to be 351.00 lakh bales, as per the Cotton Association of India (CAI). In this current year land under cotton cultivation is said to be increased.
• Road Ahead:Damodar is continuously trying to accomplish the desired results. Steps have been taken for cost diminution and manufacturing quality products by various installed machineries. Damodar’s planned expansion will lead Spindale capacity to 36,720 spindles and 13,260 TFOS.
• In Q3FY18, Damodar reported a Total Revenue of Rs. 155.54 Cr (Up 3.11% QoQ & down 7.91% YoY). However, Net Profit increased 26.67% QoQ & 79.39% YoY to Rs. 3.69 Crowing majorly to increased inventory & finished goods. Going ahead, strong performance is expectedin coming quarters due to high demand in industry and stabilizing cotton prices giving boost to Damodar’s production.
• At CMP of Rs. 147, the stock is trading at PE of 17x on its EPS (TTM) of Rs. 8.65. Although Damodar seems overpriced if compared with industry P/E 8.81x but is cheaper if compared with S&P BSE 250 SmallCap(PE 83.44x) &NIFTY SmallCap 250(PE 100.04x). The stock prices are expected to fly in coming quarters making new highs. We recommend a BUY to our investors.