Stock Data:
| Ticker | NSE: ORBTEXP & BSE: 512626 |
| Exchange | NSE & BSE |
| Industry | TEXTILE |
Price Performance:
| Last 5 Days | +9.79% |
| YTD | +1.77% |
| Last 12 Months | +48.31% |
Company Description:
Orbit Exports Limited, established in 1983, has emerged as a prominent weaving company and one of the largest exporters of novelty fabrics in India. Under the guidance of Mr. Pankaj Seth, the company has gained recognition for its diverse range of products, including women’s apparel, Christmas crafts, home décor, and occasion-specific fabrics. The company takes pride in its original and innovative designs, which are developed by an in-house design team. Its extensive fabric collection includes dupioni, taffeta, and jacquard. In addition to women’s clothing, Orbit Exports has expanded its business to cater to the menswear segment. Orbit Exports has established a strong presence in international markets, with its products being marketed in the USA, Latin America, Africa, Europe, and the Far East. The company boasts an impressive list of prestigious clienteles, including renowned brands such as Calvin Klein, H&M, Lowe’s, Raymond, and Arvind Mills. In 2015, Forbes recognized Orbit Exports as the Best under a Billion in Asia.
Despite the challenges posed by the COVID-19 pandemic, including disruptions to manufacturing plants, warehouses, and offices, Orbit Exports managed to resume operations across all locations while prioritizing the well-being of its employees. Furthermore, the company embarked on a brown-field expansion strategy and successfully established a processing and finishing unit for fabrics in Sarigam, Valsad. By incorporating new and advanced machinery, Orbit Exports aims to diversify its product lines. Looking ahead, Orbit Exports is determined to achieve world-class quality standards, explore new product offerings, and expand its presence in overseas markets. With its existing capacity and the addition of the new process house and waterjet looms, the company remains optimistic about delivering exceptional results in the coming year.
Critical Success Factors:
1. Accruals-driven growth: Orbit Exports has established itself as a company experiencing growth driven by accruals. This means that the company is able to generate attractive long-term value without relying heavily on external borrowing. By reinvesting its earnings and profits back into the business, Orbit Exports can fuel its expansion and strategic initiatives. This approach allows the company to maintain a strong financial position, reducing its dependency on debt and ensuring greater stability in its operations.
2. Broad-based revenues: One of Orbit Exports’ notable strengths is its ability to generate revenues across various geographies and products. This broad-based approach to revenue diversification helps mitigate risks associated with overreliance on a single market or product. By expanding its customer base and product portfolio, the company is better equipped to withstand market fluctuations and capture opportunities in different regions. This resilience contributes to the company’s long-term sustainability and growth potential.
3. Strong customer relationships: Orbit Exports has built enduring customer relationships, with approximately 60% of its revenues coming from customers of five years or more. This highlights the company’s ability to meet customer expectations consistently and deliver high-quality products. By establishing trust and reliability, Orbit Exports has become a preferred partner for its customers, fostering long-term collaborations and repeat business. These strong customer relationships provide a competitive advantage, as they contribute to a stable revenue stream and the potential for increased share of the customer’s wallet.
4. Timely backward integration: The strategic implementation of backward integration has been a key strength for Orbit Exports. By commissioning a process house, the company has been able to bring various manufacturing processes in-house, such as weaving and dyeing. This integration enhances the company’s control over the production process, resulting in improved cost management, quality assurance, and consistency. Furthermore, the backward integration helps Orbit Exports strengthen its competitiveness by reducing reliance on external suppliers, ensuring timely delivery, and enhancing operational efficiency.
5. Cost management and visibility: Orbit Exports employs a de-risked ‘sell and make’ approach, which contributes to effective cost management and better cost visibility. Unlike a traditional ‘make-to-sell’ model, this approach minimizes inventory costs by focusing on fulfilling confirmed orders rather than building up excessive inventory. The company’s credible order book provides visibility into future demand, enabling efficient planning and resource allocation. Additionally, Orbit Exports leverages its long-standing relationships with customers to exercise a cost-plus approach, passing on inflation costs with a reasonable lag. This approach protects the company’s profitability and strengthens its ability to manage cost fluctuations effectively.
6. Credit rating and liquidity: Maintaining a strong credit rating is crucial for Orbit Exports as it enhances the company’s access to low-cost debt. The company’s A- credit rating for long-term debt and A2+ rating for short-term debt enable it to attract funds at favourable interest rates. This liquidity not only supports the company’s growth plans but also provides flexibility in managing working capital, negotiating favourable terms with vendors, and showcasing financial stability to potential stakeholders. The availability of low-cost debt strengthens Orbit Exports’ financial position and enables it to seize opportunities for expansion and investment.
7. Working capital management: Effective management of working capital is a priority for Orbit Exports. The company focuses on controlling its receivables cycle within tolerance limits by maintaining stable terms of trade with customers. By marketing products with strong off-take and increasing cash and carry revenues, Orbit Exports improves its cash flow and reduces the risk of delayed payments. This disciplined approach to working capital management ensures stability in operations, enhances liquidity, and supports the company’s overall profitability.
8. Expertise and brand reputation: Orbit Exports has established itself as a specialist in the production of made-ups, particularly in the party wear and evening wear segments for women and children. The company’s expertise in designing and manufacturing fabric solutions for these specific markets has contributed to its strong brand reputation. Orbit Exports is known for its ability to deliver custom orders with speed and consistency, meeting the unique requirements of its customers. This reputation for quality, innovation, and timely delivery has led to increased brand recall and customer loyalty. As a trusted fabric solution provider, Orbit Exports continues to leverage its expertise and brand reputation to attract new customers and expand its market presence.
By capitalizing on its strengths, such as its accruals-driven growth, broad-based revenues, strong customer relationships, timely backward integration, cost management, credit rating, working capital management, and expertise in the market, Orbit Exports is well-positioned to continue its growth trajectory and generate sustainable shareholder value in the future.
Key Challenges:
1. Market volatility and demand fluctuations: While Orbit Exports has demonstrated the ability to generate revenues across various geographies and product segments, it remains exposed to market volatility and demand fluctuations. Changes in consumer preferences, economic conditions, or geopolitical factors can impact the demand for its products. Orbit Exports needs to continually monitor market trends and adapt its product offerings to stay relevant and competitive. Diversification across markets and products helps mitigate this risk, but a significant downturn in a key market or product segment could still pose challenges.
2. Intense competition: The textile and fabric industry is highly competitive, with numerous players vying for market share. Orbit Exports operates in a sector where price competitiveness, innovation, and speed to market are critical success factors. Rival companies, both domestic and international, may introduce similar or lower-priced products, potentially eroding Orbit Exports’ market position. The company needs to invest in research and development, maintain strong relationships with customers, and continuously innovate to differentiate its products and maintain a competitive edge.
3. Raw material price fluctuations: As a fabric manufacturer, Orbit Exports is exposed to fluctuations in raw material prices, particularly cotton and yarn. Price volatility in these inputs can impact the company’s profitability and margins. While Orbit Exports exercises a cost-plus approach to pass on inflation costs to customers, there may be a lag in implementing price adjustments, which could temporarily impact profitability. The company needs to closely monitor raw material prices, hedge where appropriate, and explore alternative sourcing strategies to mitigate the risk of sudden cost increases.
4. Currency exchange rate risks: Orbit Exports operates in multiple geographies and conducts business in different currencies. Fluctuations in exchange rates can significantly impact the company’s financial performance, particularly when it comes to exports and imports. Changes in exchange rates can affect the competitiveness of Orbit Exports’ products in international markets and lead to currency translation risks. To manage this risk, the company may engage in hedging strategies, enter into forward contracts, or explore pricing strategies to minimize the impact of exchange rate fluctuations.
5. Technological disruptions: The textile industry is undergoing rapid technological advancements, including automation, digitalization, and the rise of e-commerce. While Orbit Exports has demonstrated its ability to adapt to changing market dynamics, technological disruptions can pose challenges. Failure to keep pace with technological advancements may impact operational efficiency, product quality, and customer experience. Orbit Exports needs to invest in research and development, embrace new technologies, and continuously upskill its workforce to remain competitive in the evolving industry landscape.
6. Environmental sustainability and compliance: As consumers and regulators increasingly prioritize environmental sustainability, textile companies face the challenge of meeting stringent environmental standards and complying with regulations. Orbit Exports needs to adopt sustainable practices throughout its supply chain, from sourcing raw materials to waste management. Failure to address environmental concerns adequately could lead to reputational damage, regulatory penalties, or loss of customers who prioritize sustainable sourcing. The company should proactively monitor and comply with evolving environmental regulations and strive to enhance its sustainability initiatives.
7. Geopolitical and trade uncertainties: Orbit Exports operates in a global marketplace where geopolitical tensions and trade disputes can impact business operations. Changes in trade policies, tariffs, or geopolitical conflicts can disrupt supply chains, increase costs, and create uncertainties for international trade. The company needs to closely monitor geopolitical developments, diversify its supplier base, and maintain agility in adapting to changing trade dynamics to mitigate the potential risks associated with geopolitical uncertainties.
8. Regulatory and compliance risks: The textile industry is subject to various regulations, including labor laws, safety standards, and intellectual property rights. Non-compliance with these regulations can result in legal consequences, reputational damage, and disruptions to operations. Orbit Exports needs to ensure strict adherence to relevant regulations, maintain a robust compliance framework, and invest in employee training to minimize the risks associated with non-compliance.
Overall, while Orbit Exports has achieved significant growth and established a strong market position, it faces several risks and concerns inherent to the textile industry. By proactively addressing these risks, monitoring market trends, investing in technology and sustainability, and maintaining strong customer relationships, Orbit Exports can navigate the challenges and continue to thrive in the dynamic business environment.
Q4FY23 Financial Result:
The consolidated financial results for Orbit Exports for the quarter and year ended March 31, 2023, reveal a positive performance and continued growth. The company’s revenue from operations for the quarter stood at INR 41.09 crores, showing a slight decrease from the previous quarter but a significant increase compared to the same period last year. The year-end revenue reached INR 193.84 crores, reflecting a substantial growth of 55.8% compared to the previous year. Total income for the quarter amounted to INR 42.67 crores, indicating a steady upward trend. The company’s focus on cost management is evident from the controlled expenses, with the cost of materials consumed at INR 15.90 crores for the quarter and INR 73.24 crores for the year. Furthermore, other expenses were kept in check at INR 10.54 crores for the quarter and INR 43.70 crores for the year.
Profit before exceptional items and tax for the quarter was INR 6.08 crores, while the profit before tax for the year stood at INR 43.70 crores, showcasing a significant improvement compared to the previous year’s figures. The company’s ability to generate profits demonstrates its operational efficiency and effective utilization of resources. Orbit Exports also managed its tax expenses well, with a current tax expense of INR 0.83 crores for the quarter and INR 9.95 crores for the year. The net profit for the period after tax was INR 5.15 crores for the quarter and INR 34.38 crores for the year, representing a substantial increase from the previous year’s performance.
Overall, Orbit Exports has delivered strong financial results, with revenue growth, improved profitability, and effective cost management. The company’s focus on operational efficiency, cost control, and tax management has contributed to its positive performance. Going forward, Orbit Exports should continue to leverage its strengths, monitor market conditions, and execute its growth strategies to sustain its upward trajectory in the textile industry.
Conclusion:
In conclusion, Orbit Exports exhibits several strengths that position it for long-term success in the textile and fabric industry. The company’s foundation is at an inflection point, with the potential to generate attractive long-term value. Its accruals-driven growth, under-borrowed balance sheet, and multi-year customer relationships contribute to its sustainability and competitive advantage. Orbit Exports has demonstrated a strong cost visibility and predictability of its business through its de-risked ‘sell and make’ approach and credible order book. The company’s ability to navigate challenges such as increased logistics costs and decline in shipping container availability showcases its proactive planning and commitment to customer service, solidifying its brand as a dependable partner.
The company’s focus on enhancing capacity utilization, timely backward integration, and broad-based revenues across geographies and products further strengthens its competitive position. By balancing value-added and mid-priced woven fabric, Orbit Exports diversifies its portfolio risk and strengthens economies of scale. Additionally, Orbit Exports’ commitment to enhancing margins, strengthening gearing, and moderate debt levels contributes to its long-term profitability and financial stability. The company’s low-cost expansion strategy, coupled with its A2+ credit rating, enables access to growth funds and affordable short-term debt, supporting its timely capital expenditures and superior margins.
Furthermore, Orbit Exports exhibits strong liquidity, enabling reinvestment, better negotiations with vendors, and attracting credible stakeholders. By prioritizing working capital management and maintaining stable terms of trade, the company ensures control over its receivables cycle and cash flow. The company’s ability to generate a significant proportion of revenues from long-standing customer relationships highlights its brand strength and economies of scale. While Orbit Exports possesses several strengths, it is essential to consider potential risks and concerns. The volatility in yarn costs, market demand fluctuations, and intense competition in the textile industry pose challenges that require continuous monitoring and adaptation. Currency exchange rate fluctuations, technological disruptions, environmental sustainability, and compliance risks also need to be effectively managed.
Overall, Orbit Exports has established itself as a respected player in the textile industry with a focus on party wear and evening wear for women and children. The company’s strong brand recall, sell-and-make approach, and marquee customer base contribute to its competitive advantage. With a strategic emphasis on integration, low-cost expansion, and balance between value-added and commodity products, Orbit Exports is well-positioned for future growth and profitability.
Investors considering Orbit Exports should carefully assess the company’s strengths, risks, and growth strategies in relation to the Indian textile industry and global market dynamics. Conducting thorough due diligence and monitoring key factors will help investors make informed decisions regarding their investment in Orbit Exports.