S Kumars Nationwide’s 3QFY08 revenues increased 44% YoY, with earnings up a strong 72% YoY, better than our expected 56%. This was largely due to higher sales growth (8%) in luxury textile division benefiting from new capacities and lower than expected depreciation charge as expansions in high value cotton fabric and home textiles have been pushed back to Mar/Apr’08.
EBITDA margins grew 190bps YoY to 22.6% levels, in-line with estimates. However, growth has started to moderate; we see margins peaking at 23% in FY09E since high costs relating to brand promotion expenses and overheads relating to expansions in home
textiles and cotton fabric should limit further gains.
Company is expected to report an EPS of Rs 8.39 and Rs 9.87 for FY08 and FY09.