Winsome Textiles - Rs.25.75

Incorporated in 1980, Winsome Textile Industries Ltd (WTIL) is a part of the well diversified Winsome Group, which has a strong foothold in textiles through its group companies like Winsome Spinners, Winsome Yarns, Winsome Spectrum, Winsome Knitwear etc. WTIL manufactures 100% raw cotton white yarn in the count range of NE 10s to NE 40s both carded and combed, single and folded. It also produces the finest quality melange yarn in 100 per cent cotton as well as cotton blends with viscose, polyester, acrylic, linen, modal, wool and silk which are used to make high value woven garments. Today, Winsome is the largest producer of melange yarn in India. It exports to more than 20 countries in the Far East, Europe, USA etc. and nearly 50% of its total turnover is accounted by exports.

WTIL’s spinning unit is located at Baddi in Himachal Pradesh with a capacity of 25,000 spindles while the group can boast of an installed capacity of more than 1,00,000 spindles with 9,500 kg per day yarn/fibre dyeing unit. It is an ISO9001-2000 certified company alongwith ISO14001 Environmental Management System Certificate issued by the Bureau of Indian Standards. Last year in March 2004, WTIL completed a modernization project leading to an increase in its combing capacity, replacement of 11 Ring Frames and other equipments without any cost overrun and as per TUFS guidelines. For future growth the company is implementing Rs.10.50 cr. capex plan to add 5 combers to convert part production of carded cotton yarn to combed yarn, which offer higher contributions. Also, some balancing machines are being planned for the Dyeing House to increase production. Notably, this whole exercise will be financed by debt and internal accrual without any equity dilution. The group is also planning to foray into manufacture & export of knitwear garments in a big way.

For FY05, its sales grew by 15% to Rs.128 cr. whereas its PBT was Rs.58 lakh compared to Rs.7 lakh last year. It managed these figures in spite of the fact that the company’s first half of FY05 was affected due to higher cotton prices and low yarn prices. However the current first qtr. numbers are quite encouraging. Although sales revenue flat at Rs.31 cr. the NP spurted 150% to Rs.1.08 cr. leading to an EPS of Rs.1.80 for the June’05 qtr. Given its small equity of just Rs.5.9 cr. and reserves of Rs.21.4 cr., the book value of the share works out to Rs.46. The value of its gross block as on 31st March 2005 stood at whopping Rs.119 cr. It also has investments whose current market value is more than Rs.10 cr. In spite of such strong fundamentals, the company’s current market cap is merely Rs.15~16 cr. For FY06, it is expected to report Sales of Rs.150 cr. and NP of Rs.4 cr. i.e. an EPS of around Rs.7. Investors are strongly recommended to buy this scrip with a price target of Rs.50 (i.e. 100% appreciation) in 9~12 months.