Comments
Equirus
Arvind (Buy)
CMP: ₹103.65
Target: ₹144
Arvind Limited’s textile business is in a transition phase — from diversified fabric manufacturing to vertically-integrated textile manufacturing. After few years of muted growth and drop in margins, company’s textile segment is likely to see margin recovery driven by doubling of garment capacity, strong growth in Advanced Material Division (AMD), domestic demand recovery and rupee depreciation (export form about 40 per cent of sales). Recovery in textile EBITDA and declining losses from new businesses should drive 17 per cent PAT growth and about 300 bps RoE improvement despite heavy capex planned over FY18-21E.
We estimate Arvind’s (post-demerger) target price for March 2020 at ₹144 based on SoTP valuation. At our target price, stock will trade at 10x P/E and 1.2x P/B for 13 per cent RoE.
We expect some pressure on the share price post listing as many investors have invested in Arvind for brand business. This may lead to stock price trading 20-40 per cent below our TP and that could provide good opportunity to invest.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.