'Hold' KPR Mill Shares Says Systematix Citing Stable Performance, Steady Outlook Despite Global Uncertainties

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Systematix Report

We present key takeaways from our meeting with the senior management of KPR Mill Ltd. Discussions focused on the demand environment across key export markets, progress on UK free trade agreement, implications of US tariffs, and outlook for the textiles and sugar sectors.

Management cited Q1 FY26 as a routine quarter, which saw minimal disruption from tariffs, as the company had already executed nearly half of its US orders (~20% of exports) and shipped the balance with minor delays and at 2-5% discount, with no reported cancellations.

The company has held back fresh US orders for the second half of the year. It intends to reassess intake during Oct-Nov 2025, once clarity emerges on tariffs.

Europe (~60% of revenue) continues to provide stability, and the UK FTA is expected to gradually lift volumes, with the share of UK revenue expected to rise from ~20% to ~25% in the coming quarters.

For FY26, management reiterated its guidance of 10-15% revenue growth in textiles, driven by 15-20% growth in garment volumes and ~20% Ebitda margin.

The current export order book stands at ~Rs 15 billion (up 12% YoY) to be executed over the next six months. Management expects the current garment capacity to touch peak utilization in FY26, with expansion plans for FY27 under evaluation.

The temporary removal of cotton import duty until Dec 2025 provides short-term relief, while yarn trends remain stable. Sugar crushing is set to commence during Q3, with both revenue and margins expected to improve YoY, supported by a favorable monsoon and higher cane availability.

We expect muted garmenting volumes in FY27, given that any new green field capex takes at least 12-15 months to commence operations. The key strategic challenge lies in resolving the tension between its 10-15% volume growth target and its current full capacity utilization, making the final decision on expansion plans a critical catalyst for future performance.

We have tweaked our revenue/Ebitda/PAT estimates by 1% each for FY26E and FY27E.

Reiterating Hold with a revised SoTP-based target price of Rs 1,041 (earlier Rs 1,027), based on implied FY27E P/E of 28x and EV/Ebitda of 19x. We have assigned EV/EBIT of 25x to textiles and 12x to the sugar and ethanol business.

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