Kotak Securities' Fundamental Analysis BUY with the following recommendation,
Shri Lakshmi Cotsyn (SLC) is a leading manufacturer of quality textile products like fusible interlining, fabric, suiting, shirting, terry towel, home furnishing, garments, quilt fabric and comforters. It also manufactures specialized products like fire retardant, waterproof, nuclear bio chemical and camouflage printed fabric. It exports to reputed clients like IKEA, Wal-Mart and J C Penny among others. It has successfully diversified into defense products like bullet proof jackets, helmets and protected armored vehicles which are bulletproof and blast proof. Due to expansions in technical textiles and focus on higher margin defense business we expect PAT of SLC to grow at CAGR of 24.4% from FY10 to FY12E. At the current market price of Rs.154 SLC is trading at very attractive valuation of 3.3x FY12E fully diluted EPS of Rs.46.6. We are positive on the medium to long term growth prospects of SLC. Therefore, we are initiating coverage with a BUY recommendation on SLC with a price target of Rs.220 (43% upside potential) over a 12-month horizon. This is based on the DCF method of valuation, with 12.6% WACC and 4.0% terminal growth rate.
