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Thursday, August 11, 2011

Sudar Garments Ltd:-Buy/sell/,growth prospects and recommendation,news and results,target price and analysis,view and outlook,multibagger

Scripscan:Sudar Garments Ltd

Story:Sudar Garments is engaged in the business of manufacture of garments for men's wear, women wear and kids wear. It has manufacturing facility at Khalapur Taluk, Raigad District, Maharashtra. The company is an apparel manufacturer with capability of designing and manufacturing involving cutting, body stitching, washing, Ironing and finishing.Limited experience in handling retail or franchise business and existence of already strong retail chains and various brands in the market is a major threat to the company to establish and strengthen its retail share.Highly competitive retail market and spike in yarn and fabric prices exert pressure on margins.Despite having own brand "Glory to Glory", major part of the sales were to wholesalers and Merchant exporters.The company also lacks long-term export contracts.The Operations are subjected to high working capital requirements.It is fully dependent on the external suppliers for fabrics, which constitute 90% of the total raw material cost.Any material shortage or interruption in supply of raw materials and volatility in the prices will impact the business.The company's manufacturing operations are labor intensive and depend on the availability of the personal.Nearly 95% of the company's employees are employed on contract basis.The company derives 99% its revenues from just 5 customers.So any loss of one or more customers or reduction in their demand could adversely impact the business of the company.On the other hand, significant portion of the company sales (more than 95%) were on cash credit.Delays associated with the collection of receivables from the customers or receivables turning bad will adversely impact the business operations.The company has negative cash flows from operating activities in FY 2006, FY 2007, FY 2010 and HI FY 2011 due to increase in the trade debtors and Inventories.The company ended fy11 with 115crs in sales and 7.7crs in profit which gaves an eps figure of only 4rs.There are two basic issues here.Relative to smaller scale of operations, the company has disproportionately higher equity.Secondly, non-integrated apparel players (without own yarn / fabric manufacture) are witnessing fall in margins.Uninspiring numbers and high valuations makes me wary of the counter.Sell at rallies.

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