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Vardhman Textiles - Q2FY21 Company Update - ICICI Securities

Posted On: 2020-10-30 08:32:45


Vardhman Textiles reported a recovery on the revenue front with revenues in Q2FY21 declining YoY marginally by 2.3% to Rs. 1625 crore. However, gross margins fell 940 bps YoY to 38.5%, which led EBITDA margin to decline 612 bps YoY to 8.9% in spite of 267 bps reduction in power & fuel cost. EBITDA fell 42% YoY to Rs. 144.7 crore. EBITDA was impacted by hedging loss on cotton derivative contracts to the tune of Rs. 26 crore. Consequently, PAT declined 49% to Rs. 61.6 crore.

Valuation & Outlook

Vardhman is among the few textile companies that have been able to maintain a debt equity ratio below one despite continuous capacity addition. Though the near term financial performance is expected to be dented owing to low domestic demand, we expect VTL to tide over the same owing to its strong balance sheet and long standing relationship with marquee clients, which would enable a gradual demand recovery when the situation normalises. Uncertainty in international trade owing to trade disputes and geopolitical issues can subdue the financial performance. Margins in the textile business have been lower. An improvement in the same is critical for enhancement of financial performance. We maintain HOLD rating with a target price of Rs. 740 (~6x FY23E earnings).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_VardhmanTextiles_CoUpdateOct20.pdf

Shares of VARDHMAN TEXTILES LTD. was last trading in BSE at Rs.765 as compared to the previous close of Rs. 765.9. The total number of shares traded during the day was 802 in over 224 trades.

The stock hit an intraday high of Rs. 785.05 and intraday low of 753.1. The net turnover during the day was Rs. 613704.


Source: Equity Bulls

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