Brokerage JM Financial Sees Huge Potential: KPR Mill Stock to Surge 21%? Target Price Revealed!

JM Financial, a prominent domestic brokerage, has launched its coverage on KPR Mill, an integrated apparel manufacturer, with a strong 'Buy' recommendation. The brokerage has set an ambitious target price of ₹1,215 per share, suggesting a potential upside of 21% from its recent closing price. This optimistic outlook is based on KPR Mill's extensive scale, its fully integrated business model, and a diversified geographic and product mix.

Analyst Insights on KPR Mill

JM Financial analysts believe that KPR Mill's significant scale and its end-to-end operational integration provide structural advantages in maintaining healthy margins, irrespective of market cycles. The company's ability to internally consume yarn and fabric helps it bypass intermediate supplier costs, thereby stabilizing its earnings before interest, tax, depreciation, and amortisation (Ebitda) margins, which are projected to remain between 19-20 per cent. Furthermore, KPR Mill's commitment to renewable energy, with substantial wind, solar, and bagasse-based cogeneration capacities, significantly enhances its cost competitiveness.

Diversification Drives Resilience

The company's strategic diversification into the sugar and ethanol business is also a key factor contributing to its appeal. This segment offers counter-cyclical earnings, bolstered by regulated ethanol pricing and assured offtake from oil marketing companies. This diversification acts as a buffer against volatility in the textile sector, ensuring consistent overall profitability.

Growth Projections and Valuation

Looking ahead, JM Financial anticipates KPR Mill's revenue, Ebitda, and profit after tax (PAT) to grow at a Compound Annual Growth Rate (CAGR) of 14%, 16%, and 17% respectively, between FY25 and FY28. The brokerage has valued the stock using a 32x FY28E Price-to-Earnings (P/E) multiple, leading to the target price of ₹1,215.

Stock Performance and Market Context

As of Thursday, December 4, KPR Mill's stock was trading at ₹984.2, showing a slight dip of over 2.2% compared to the previous session on the NSE. This movement occurred while the broader NSE Nifty50 index saw a modest gain. The company's market capitalisation stood at approximately ₹33,637.92 crore.

Fully Integrated Operations

KPR Mill's strength lies in its complete integration across the textile value chain, from spinning and knitting to processing and garmenting. This reduces reliance on external suppliers, stabilizes costs, and ensures optimal asset utilization throughout different market conditions. The company has demonstrated resilience, achieving Ebitda margins of 19.5% in FY25 and 19.2% in 1HFY26, despite industry headwinds.

Garmenting: The Core Growth Engine

Garment manufacturing is identified as the primary growth driver for KPR Mill. The company has substantially increased its garment production capacity, expanding from 63 million pieces in FY14 to a projected 200 million pieces by September 2025. Garments currently account for 41% of the company's revenue, with further expansions planned to support future growth.

Diversified Geographic Footprint

KPR Mill's export markets are well-diversified, with Europe constituting 60% of its export revenue. This reduces dependence on the US market and provides stability amid global economic uncertainties. The company has shown an ability to manage challenges like tariff disruptions with minimal impact on its financials and buyer relationships.

Sugar-Ethanol Business Contribution

The sugar-ethanol segment is a significant contributor, adding ₹11 billion to the consolidated revenue in FY25. This business acts as a natural hedge against fluctuations in the textile sector, reinforcing the company's overall financial stability.

Impact

This 'Buy' rating and target price from a reputable brokerage like JM Financial can significantly influence investor sentiment towards KPR Mill. It may attract new investors, boost buying interest, and potentially lead to an upward movement in the stock price towards the target of ₹1,215. The detailed analysis by the brokerage also provides investors with a clearer understanding of the company's fundamental strengths and future prospects.

Impact Rating: 8/10

Difficult Terms Explained

• Ebitda (Earnings Before Interest, Tax, Depreciation, and Amortisation): A measure of a company's operating performance, excluding the impact of financing, taxes, and accounting depreciation.
• CAGR (Compound Annual Growth Rate): The average annual growth rate of an investment over a specified period of time longer than one year.
• FY25-28E (Financial Year 2025-2028 Estimates): Projections for the company's performance during the specified fiscal years, based on analyst expectations.
• P/E Multiple (Price-to-Earnings Multiple): A valuation ratio that compares a company's stock price to its earnings per share, indicating how much investors are willing to pay for each dollar of earnings.
• NSE (National Stock Exchange): One of the leading stock exchanges in India.
• OMC (Oil Marketing Companies): Companies involved in the marketing and distribution of petroleum products.
• MW (Megawatt): A unit of power, equal to one million watts.
• GW (Gigawatt): A unit of power, equal to one billion watts.
• TCD (Tonne Crushing per Day): A measure of the capacity of a sugar mill, indicating the number of tonnes of sugarcane it can crush per day.
• KTPA (Kilo Tonnes Per Annum): A unit of measurement for production capacity, usually for industrial products like chemicals or fertilizers.
• CAPEX (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.