Equity | India |Textile

Sales
Note

Sangam (India) Ltd.

Company Snapshot

CMP (`)

Target (`)

292

345

Potential upside

Absolute Rating

18%

BUY

Market Info (as on 2nd December 2015)

BSE Sensex

26118

Nifty S&P

7931

Stock Detail
B

BSE Group
BSE Code

514234

NSE Code

SANGAMIND

Bloomberg Code

SNGM IN

Market Cap (`bn)

11.32bn

Free Float (%)

5.66

52wk Hi/Low

299/68

Avg. Daily Volume (NSE)

105086

Face Value / Div. per share (`)

10.00/2.00

Shares Outstanding (mn)

39.4

Shareholding Pattern
Promoters

FIIs

DII

Others

47.35

3.00

4.03

45.62

Financial Snapshot

Sangam India is the flagship company of Sangam group & a Rajasthan based, leading manufacturer
of PV (Polyester Viscose) yarn in India. Company is one of the market leaders in PV dyed yarn with
25% market share. The company is also present in the Indian synthetic blended fabric and denim
segments with brands such as Sangam Suitings and Sangam Denim. The companys client base
includes Raymond, RSWM, Banswara Syntex, Donear, Siyaram and Grasim. It has a network of 100
dealers and 1,000 retailers across India. Sangams manufacturing facilities are located in Bhilwara,
Rajasthan. As of FY15, the company has a spinning capacity of 211,296 spindles and 3,128 rotors;
weaving capacity of 437 looms; and processing capacity of 53 mn meters P.A. Company also has a
good presence in export markets with export revenue contributes around 22%.

Investment Rationale
Foray into Seamless Wear Garment Segment
Company recently forayed into the seamless wear garment segment under its own brand Name
Channel Nine. Channel Nine offers wide range of the woman products including intimate wear,
shape wear, medical wear, active wear, casual wear and nightwear. In order to ensure best quality
products, company imported innovative seamless technology from Italy. Company has built up
manufacturing capacity of 3.6mn pieces p.a. with 36 seamless knitting machines. Channel Nine is
companys first direct to consumer brand i.e. B2C mode & this will pave way for improving margins
going forward. Company has already expanded its footprint across 600 multi brand outlets across
India & looking to expand its further with opening up 8-10 Exclusive Brand Outlets as well as newer
channels like online to capture the market share in `15000cr domestic innerwear industry.
Company expects higher double digit growth in this segment going ahead with improved margins.
Capacity Expansion to drive future Growth

(`mn)

Y/E March

FY13

FY14

FY15

FY16E

Net Sales

14790

14330

14690

15571

2140

1960

2170

2569

Net Profit

510

410

520

731

P/E(x)

2.6

3.4

5.9

15.6

ROE (%)

17%

12%

14%

17%

EPS

12.9

10.4

13.2

18.6

EBITDA

02nd December, 2015

In the past four years, in-house consumption of PV yarn has grown from 5% in 2010-11 to 18% in
2014-15. At the same time, consumption of cotton yarn stands at about 50% despite nearly doubled
capacities in the past four years. Company currently executing an expansion project having outlay
of `198cr being partly funded by term loans of `158cr to further enhance yarn & fabrics capacities
in order to ensure complete integration of textile value chain in the coming years. This projects is
envisages installing 26736 spindles of PV Dyed Yarns, 74 imported weaving machines & one denim
line & 2MW solar power plant. Capacity expansion will further minimal on external source of raw
materials for its denim fabrics as well seamless garment segment. This will ensure better
integration, efficiency in the value chain & will lead to higher scale.
Improving financial performance & margin.
Sangam India posted revenue CAGR of 6% between FY11-FY15. Also, operating margin of the
company remains flat at 14.5% in last few years. However, companys operating margin has
improved by 150bps to 16.1% in H1FY16 led by increasing export of value added products & better
integration. Further, company has invested close to `300 crore in capex (forward and backward
integration) in last few years but reduced its debt/equity ratio to 1.36x in H1FY16 from over 2.9x
in FY2011 due to strong positive cashflow.

Share Price Performance

400
350
300
250
200

Valuation

150
100

Sangam (India) Ltd

Dec-15

Oct-15

BSE SENSEX

Rel. Perf.
1Mth
3 Mths
6Mths
15.0
30.9
125.8
Sangam (%)
(1.5)
1.8
(6.0)
Sensex (%)
Source: Company data, Retail Research

Dhiral Shah

Nov-15

Sep-15

Jul-15

Aug-15

Jun-15

Apr-15

May-15

Mar-15

Jan-15

Feb-15

Dec-14

50

1Yr
249.2
(8.4)

+91-22- 6614 2693

At CMP of `292, Sangam India trades at 15.7x its FY16E EPS of `18.6. Foray into seamless garment
segment & successful integration will lead to improvement in financial performance as well as
return ratios. We believe stock to trades at 18.5x its FY16E EPS, which gives a target price of `345,
thereby providing 18% upside from current level.

dhiral@geplcapital.com

Retail Desk

Equity | India | Textile

Sangam (India) Ltd.

02nd December , 2015

NOTES

GEPL CAPITAL Pvt Ltd

Reg Office: D-21 Dhanraj Mahal, CSM Marg, Colaba, Mumbai 400001

Analyst Certification
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or
indirect compensation in exchange for expressing specific recommendations or views in this report:
Name : Dhiral Shah
Sector : Textile

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Retail Desk | Sales Note