Vardhman Textiles is India’s leading fully integrated textile company. It is well placed to benefit from the strong demand uptick for cotton yarn post the ban imposed by the US on China’s Xinjiang region, as per HDFC Securities which sees the multibagger stock to surge in the next two quarters.
The domestic brokerage and research firm believes investors could buy the multibagger stock in ₹2580-2620 band and add on dips to ₹2230-2270 band for base case fair value of ₹2770 and bull case fair value of ₹3030 over the next 2 quarters.
“Importing companies in the west are also looking to diversify away from China, which is beneficial for textile companies in India. India. The long-term demand outlook remains positive as global retailers seek additional sourcing partners to diversify their supply chains,” it added.
Vardhman Textiles reported strong performance in Q3FY22 with revenues increasing by 49% year-on-year (YoY) to an all-time high level of ₹2,603 crore driven by higher yarn and fabric realisation and improved capacity utilisation. Fabrics division, which has been a laggard in the last few quarters, reported 100% utilisation for the first time, HDFC Securities’ note highlighted.
“We are positive on the future earnings growth trajectory of VTL. We expect Revenue/EBITDA/PAT growth of 20/40/53% over FY21-FY24 driven by strong demand and increased capacities gradually coming on stream. EBITDA margins are likely to compress from the current unsustainable levels but would remain at the upper end of the 18-22% guidance given by the management,” the note added.
The company’s board of directors have approved a 1:5 stock split from face value of ₹10 per share to ₹2 per share, subject to the approval of the shareholders. Vardhman Textiles shares have rallied over 127% in a year’s period.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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