Brokerage firm Antique stock broking has initiated coverage on Kewal Kiran Clothing Ltd. with a buy rating and a price target of Rs 805, citing the retail firm's double-digit margin and a healthy balance sheet.

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Antique's price target implies a potential upside of 40 percent from Monday's closing levels.

Shares of Kewal Kiran Clothing gained as much as 9.4 percent to Rs 628.95, which is a 52-week high for the stock. This is also the biggest single-day jump for the stock since May last year.

Antique in its note has said that Kewal Kiran Clothing has built a robust business model with consistent double-digit margins, healthy cash generation, and strong return metrics.

The company's strong business model is majorly driven by a fully integrated value chain, asset-light store expansion and restricting excessive discounts, it said.

Antique said that the company aims to grow its exclusive brand outlets (EBOs) footprint at 20 percent CAGR (compound annual growth rate) during the financial year 2023-25 (FY23-25) primarily through the franchisee route. This was in comparison to the 11 percent growth registered in the last five years.

The broking firm expects Kewal Kiran Clothing's revenue, operating profit, and profit after tax to grow at 18 percent, 21 percent, and 22 percent respectively over financial year 2023-2025 with steady return ratios and free cash flow generation.

A strong brand profile, disciplined management, a consistent track record, and a robust balance sheet position warrant a re-rating from the existing 19 times price-to-earnings for financial year 2025, Antique said in its research note.

The company is involved in the manufacturing, marketing, and retailing of readymade clothes. Its brands include Killer, Lawman Pg3, Integriti, K-Lounge, and Easies.

Shares of Kewal Kiran Clothing are trading 8.8 percent higher at Rs 625.80. The stock is up for the seventh day in a row.

First Published:Jul 11, 2023 12:17 PM IST