Khadim operates in the attractive value segment with asset light distribution (franchisees and distributors). IPO at 50x FY17 EPS, a year with the highest ever gross margins (40%) and RoCE (18%), is at a marginal discount to Relaxo (51x) and Bata (57x) who have higher RoCE.
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Reviews & Recommendations of Khadim India.Adroit Research has the following View,
On the upper price band of Rs 750, the IPO is priced at 43.8x its FY17 earnings. Its peers namely Bata, relaxo and liberty are trading in a range of 45 to 49x its FY17 earnings. We believe Khadim is reasonably priced at current price band considering its business model, financial performance and other factors. We therefore, recommend Subscribe to the IPO.
Angel Broking has the following Review,
In terms of valuations, the pre-issue P/E works out to 42.2x its FY2017 earnings (at the upper end of the issue price band), which is slightly lower compared to its peers like Bata. However, Bata has strong presence across India with well-established brand and its entire revenue comes from retail business. On other hand, KIL’s most of the revenue comes from East geography mainly from Kolkata and retail revenue is only 70% and balance from distribution business. Despite the above positives factors and lower valuations compared to Bata, we however, believe that the current valuation for this company is fully factored in the price, which doesn’t provide further upside for investors. Hence, we recommend NEUTRAL rating on the issue.
Motilal Oswal Securities Research Analysts have the following message,
KIL is the 2nd largest footwear retailer with strong brand recall in East India, with increasing presence in Southern and Western India. KIL has delivered strong Revenue / EBITDA / PAT growth of 10% / 11% / 36% in FY13-17. We like KIL mainly due to 1) Leadership positioning in East India and 2nd largest positioning in terms of retail outlets, 2) Strong brand recall and focus on expanding reach, 3) Strong ROEs / ROCEs of ~18%+. At upper price band, the issue is priced at PE of 43.8x FY17 post issue (and 42.2.x FY17 pre issue). We believe premium valuation in justified in context of positives mentioned above. It is available at discount as compared to peer valuation (Bata India Ltd at P/E of 59.8x, Relaxo Footwears Ltd at 50.6x and Liberty Shoes Ltd. at 68x). Hence we recommend SUBSCRIBE for long term investment.
Spa Securities Analyst Nandan Kamat said,
We expect revenues to grow at 15% CAGR FY17-19E with 140 bps expansion in EBITDA margins to 12%. We expect PAT to grow at compounded rate of ~36% to INR 566 mn by FY19 owing to reduction of Interest cost on account of debt repayment. At the upper
price band of INR 750/share, the issue is valued at a PE of 43x with FY17 Adj.EPS of INR 17.4. We recommend to SUBSCRIBE to the issue as a high risk high return long term investment.
Centrum Wealth Management has the following Review,
At the higher end of the price band of Rs750, the issue is valued at 43.8x P/E on FY17 basis (post dilution). This appears full given the current financials (Rev CAGR of 10.1% over FY13-17, OPM~10.5% and RoE ~18%) and challenges owing to competition for pan India expansion. Further, even if the money raised at such valuations was flowing into the company, it would have ultimately belonged to shareholders. However,
in this case 91% of the money raised is going to the selling shareholder (PE investor & Promoters) and not into the company.
