Tag: Kitex

Kitex Garments – Earnings Power Updated

Another year gone, Got my hands on Kitex Annual report and updated the Earnings Power Box. Lets look at how the company has fared

Before you proceed, its better you go through this post so that you are familiar with terms used below

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The Accrual EPS (or reported EPS) saw an increase of 11% while the Defensive EPS declined by 30% and Enterprising EPS declined by 4%

What led to such a sharp decline in Defensive EPS ?

While the company’s purchase of fixed assets reduced by 80% (INR 7.37 Cr Vs INR 31.7 Cr) the working capital increased by INR 47.7 Cr (Last two years they had reduced their working capex). Most of the additional investment is due to the fact that Accounts receivable has increased by 50% and current liabilities have not kept pace with it. Not sure if  company had a significant change in credit policies.

 

Even with a decline in Defensive EPS, the company continues to be in wealth maximisation quadrant

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Some other titbits of from Annual report which I found interesting

  • Last year annual report claimed that there capacity was 5.5 lakhs pieces of infant wear per day, this year it’s called out as
… Read the rest

How using earnings power box lets you ask right questions ?

Over my limited experience in equity markets, I have come to conclusion that earnings power box is a powerful tool to analyse authenticity of corporate earnings. While I am not going to repeat much of much I have written earlier, you can go through it here and here

One of first things I do after getting annual reports of the companies I hold is to update their earnings power box (EPB)

Updating it sets me in right frame of mind to query annual reports, let me run through an example to elucidate my point

In 2014 this is how Kitex ‘s  EPB looked like

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A company in wealth maximizing quadrant 2, the more number of years it continues its advance in this quadrant the more it will continue to create value for owners

2015 EPB will blow your mind away

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The company made a significant advance in quadrant 2, no wonder stock market rewarded the stock in the bull market

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This is where we start our investigation

First let’s look at raw data for per share earnings

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The accrual EPS (one which is reported as diluted EPS in Profit and loss account) had a significant jump from INR 12.08 /Share … Read the rest