KPR Mill shares jump over 6% in early trade; MOFSL sees limited upside

Shares of KPR Mill Ltd climbed 6.19 per cent in Tuesday's early trade, hitting a high of Rs 1,151.95 after the textile and apparel company reported its June-quarter earnings. The company posted a 9.6 per cent year-on-year (YoY) increase in revenue to Rs 1,940 crore in Q1 FY27.

Motilal Oswal Financial Services Ltd (MOFSL) said the revenue growth was driven by improved performance in the sugar segment. "The textile portfolio saw muted growth of 1 per cent, while the sugar segment grew 21 per cent. Gross margin improved 480 bps YoY to 40.7 per cent, while EBITDA margin settled at 19.4 per cent (+180 bps YoY)," it stated.

Looking ahead, MOFSL expects KPR Mill's revenue growth to continue at around 13 per cent, supported by capacity ramp-up, demand in the garment segment and expansion in higher-margin branded apparel.

"Profitability is likely to strengthen gradually, with EBITDA margins expanding to 21.5 per cent and APAT margins expanding to 14.8 per cent by FY28E, driven by operating leverage and a better product mix," MOFSL added.

"We believe the company is well-positioned to benefit from its leadership in the Indian textile and apparel industry, supported by the largest garmenting capacity among listed peers. We model a revenue, EBITDA, and PAT CAGR of 13 per cent, 20 per cent, and 20 per cent, respectively, over FY26-28, fueled by growth in the garment portfolio," the domestic brokerage also said.

Despite the growth outlook, MOFSL said the stock's current valuation leaves limited room for upside. "We believe the current valuation already factors in low- to mid-teen growth, leaving limited upside at CMP. Hence, we maintain our Neutral rating with a TP (target price) of Rs 1,200 (valuing the stock at 22x FY28E EV/EBITDA). Key risks: dependence on export markets, demand cyclicality in the apparel industry, and intense global competition," it stated.

Meanwhile, Nuvama Institutional Equities highlighted KPR Mill's plans for fresh capital expenditure.

"KPR has announced fresh capex of Rs 1,230 crore, funded through internal accruals, adding about Rs 2,000 crore of topline at full capacity – implied fixed asset turns of 1.6x against 2.7x reported in FY26, diluted by the upstream investments," the brokerage said.

Nuvama is expected to revisit its estimates and rating after receiving further operational details.