Hello Sir,

Hope you are doing well.

It is believed that no matter what, parents don't generally reduce expenses related to kids or even if they do, it's one of the last things they cut their expenses on.



In line with the above philosophy, in this mail we have shared notes from the Q1 FY 23 con-call of S P Apparels which is one of the leading manufacturer and exporter of knitted garments for infants and children. Hope you find the details useful for your own investments or to add the stock to your watch list.


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S P Apparels - Notes from Q1 FY 23 concall

General -

  • There is a recession all over Europe and the U.K. due to this Russia, Ukraine war. As we always said, with regards to babies and kids, we are not much affected.
  • But, there is kind of a competition with other countries like Sri Lanka, Bangladesh, because everyone is in need of orders. So that is the challenge we are facing.
  • We are able to manage so far by being competitive to some extent. However, we are working internally to see how we can mitigate this reduction in margin and get back to the same position in terms of margin.
  • Last year, the customers were talking about diverting the business from China. This time, they want to divert some of the business from Bangladesh for 2 reasons - One is that the over jumping of orders to Bangladesh, which is too risky for them.
  • Second, the raw material costs, the power problems, power issues and uncertainties on deliveries. So, it's a big concern for the buyers. So they want to play with the safer country. That's one of the reasons again, they prefer India.


  • Regarding free trade agreement (FTA) for U.K., it's a long awaited one and our commerce minister has indicated that it would happen very soon in the near future on account of 75th independence anniversary.
  • If that comes through, then it will be a very good opportunity for India because we will be at par with duty-free countries like Sri Lanka, Bangladesh, Pakistan and other countries. So there will be same level playing field so we can take more orders at the competitive prices.

Customer concentration -

  • One customer is about 40%, and the second one is about 25%, and then other one is 15%. And the remaining all about -- are around 5% to 10%.

Garments division -

  • Garment division made a revenue of INR 223 crores as against INR 116 crores year-on-year, which is a 93% increase. EBITDA margins of the garment division stood at 21.6% as against 26% last year.
  • Total exported quantities stood at 14.8 million pieces. Adjusted EBITDA of the garments division stood at INR 48.2 crores of the current quarter as against adjusted EBITDA of INR 29 crores year-on-year. Our current order book stands at around INR 400 crores.
  • We are in the process of adding 2 more customers, new customers from Q3 onwards


  • It has seen a lot of disruptions in supply chain, majorly due to the third wave in the U.K. and Europe. Nonavailability of adequate containers has interrupted the supply chain severely and disturbed the revenue for the current quarter.
  • Revenue for the quarter stood at GBP 1.21 million as against GBP 1.12 million last year. SPUK has made losses of GBP 33,000 as against loss of GBP 8,000. I'm confident that SPUK will be able to come out of the crisis and will be able to do well going forward.

S P Retail Ventures -

  • We have added 2 more brands under the Retail portfolio.
  • We have added a children's brand, known as Angel & Rocket, which is a premium brand. We have also added 1 more brand under the Retail Ventures portfolio.
  • Currently, we have 59 stores under all brands. We have opened 2 new stores for Angel & Rocket in Bangalore, which are doing well. We have also opened stores for HEAD, which is also doing well. We are confident that with brands like Crocodile, HEAD and the Angel & Rocket and also Natalia, it will do very well and we'll be able to get this company listed at an appropriate time separately.
  • Total revenue for Retail stood at INR 17.14 crores, and we had a positive EBITDA of INR 50 lakhs, and we have a loss of INR 40 lakh for the first quarter

Capacity Utilization -

  • It is around 78% and this is expected to increase by around 10% to 15% going forward.
  • We have total about 5,100 machines installed capacity. And currently, we are using about 75% of it. We're comfortable close to 4,000. And in the next 3 months' time, we are expecting this to go up to 80%, 85% by November, December, which means it will cross about 4,200 machines.
  • In the future, probably in 12 months from now, we are expecting another about 15% to 20% increase in the machine capacity from current scenario
  • There are 2 methods of increasing the production, not physical machines alone because we will be adding on another about 300 to 400 machines next year by now.
  • We have been mentioning in the last few con calls that we are planning for 2 factories starting with second shift. So already we have started 1 factory, which there's a second shift about the 2 lines. So gradually in every quarter, we will be increasing 2 to 3 lines in the second shift. So all these combinations, we will be able to increase our production capacity by about 600 to 700 machines.


  • Our new factory in the down south is under process and is expected to be completed by end of June '23.

Debt -

  • We have a gross debt of INR 199 crores and a net debt of INR 171 crores.


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Disclaimer: This is not a recommendation to buy/sell S P Apparels. These notes are as announced by the companies on exchanges and only for the purpose of information and education.


Best Regards,

Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.com/

SEBI Research Analyst Registration No. INH100001690 

Research Analyst Details

Name: Ekansh Mittal   Email Id: [email protected]   Ph: +91 727 5050062

Disclaimer: You can access it here - LINK

Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – No

Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No

Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No

Whether it or its associates have received any compensation from the subject company in the past twelve months – No

Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No

Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No

Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No

Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No

Whether the research analyst has served as an officer, director or employee of the subject company – No

Whether the research analyst or research entity has been engaged in market making activity for the subject company – No