Thread by @MultipieSocial

The Union Cabinet is expected to approve the Production Linked Incentive (PLI) Scheme for Textiles sector of Rs 10,683 crores tomorrow.

A short 🧵on Himatsingka Seide, which operates the world's largest Cotton Spinning plant!
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Himatsingka Seide is an integrated Home Textile player focused on:
✅ Bedding (Bed-Pillow sheets)
✅ Bath (Terry towels)
✅ Drapery
✅ Yarn & Fibre
Branded portfolio constitutes ~90% of sales.

Exports to 32 countries (80% of sales from US); strong focus on Europe.

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Model: Owned private + licensed brands

It has procured manufacturing and distribution rights for 15 top-notch global brands due to its vast distribution network and in-house design capabilities.

In FY21, it has added The Walt Disney co. to its global portfolio in Europe.

4/12
Capacity and utilization: Significant improvement in last 6 months shows improving demand.

1⃣ Bedding (61 Mn metres; 80% utilisation)
2⃣ Terry towel: 25,000 MT (up from ~30% in FY20 to 65% in Q1 FY22)
3⃣ Upholstery (2 Mn metres)

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Capex: Rs 2,500 crs over FY17-FY20 to set up 1 brownfield (bedding) & 2 Greenfield projects (spinning & towels) & this is helping co. to cater for the robust demand from the US.

Note: The capacity of terry towel has reached ~66% in just 14 months of commencement!

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Management Focus:
📌Broaden portfolio by partnering with more brands
📌Expanding on e-com platforms for reach
📌Price hikes in near-term to cover high RM cost
📌Improve utilization given strong order flows
📌Expand EBITDA to ~20% levels in the next 3 yrs.
📌Debt reduction

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Sector’s near term tailwinds:
1⃣ Strong demand from US (India & Vietnam are key beneficiaries of China +1 focus)
2⃣ Strong demand from Europe if India allows FTA, with Pakistan’s GSP+ status being withdrawn.

Note: Pakistan exports ~5 Bn Euro of textile & apparels to Europe

8/12
As Europe is reconsidering its partnership with Pakistan, India might take advantage of this disruption.

#RoSCTL - an export incentive scheme has been extended till Mar’24 so additionally this will also encourage textile exporters as it will improve their revenues by ~5%.

9/12
Financials:

While last 2 years have been subdued (see image),
there are signs of uptick with Himatsingka reporting its highest ever quarterly sales and profits in Q1 FY22. The management is targeting 20% EBITDA margins over next 3 years.
screener.in/company/HIMATS…

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Return ratios:

Given favorable sector tailwinds, Himangsingka Seide might see strong order growth and as utilisation increases, we can expect the return ratios to improve from here.

11/12
Key risks:

1⃣ High debt - Started deleveraging the balance sheet; debt reduced by 350 cr to 2467 cr in FY21 (still high)

2⃣ High dependence on US markets: Looking to expand in Europe.

12/12
Link to the latest Annual report: Good read bseindia.com/bseplus/Annual…

Latest earning call:
bseindia.com/xml-data/corpf…

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