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KLRF Ltd

Flour milling and textiles to experience steady growth, castings to augment top line

EBIDTA margin of castings business to lend little support to overall margin

CRISIL Equities

Financial Outlook

Revenues to grow to Rs 1.8 bn by FY12 at a two-year CAGR of 7.7% We expect KLRF’s revenues to register a two-year CAGR of 7.7% to Rs 1.8 bn in FY12 from an estimated Rs 1.6 bn in FY10 (Rs 1.4 bn in FY09). The growth is expected to be led by steady rise in revenues from textiles and flour milling divisions, supported by rise in level of operations from the castings division.

Top line growth to be fuelled by castings business

(Rs mn) 2,000

20%

1,802

1,800

18.2%

1,694

18%

1,600

1,553

16%

1,403

1,423

1,400

14%

1,200

12%

1,000

9.1%

10%

800

8%

9.1%

600

6.4%

6%

400

4%

200

1.5%

2%

-

0%

FY08

FY09

Revenues (LHS)

FY10E

FY11F YoY Growth (RHS)

FY12F

Source: Company, CRISIL Equities estimate

EBITDA and PAT margins to remain range-bound Overall PAT margin for KLRF turned negative in FY09 mainly due to a rise in cotton prices and a concurrent inability to pass on the higher costs to yarn customers due to overcapacity. Yarn prices have since recovered. PAT margins are estimated at 1.3% in FY10. They are expected to rise to 2.1% in FY11 and 2.2% in FY12.

We expect EBIDTA margin in the low value-added flour milling division to remain at about 5.5-6.5%. For the castings division, we expect it to rise from an estimated 0.9% in FY10 to 7.5% in FY12 as the foundry enters the business-as-usual phase of operations.

EBIDTA margin for the textiles business has improved from 8.5% in FY09 to an estimated 17% in FY10. It is likely to remain between 15% and 16% thereafter in line with a recovery in demand for textiles.

Overall EBIDTA margin for KLRF is expected to rise from an estimated 9.2% in FY10 to 9.9% in FY11 and 9.5% in FY12.

7

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