Q3FY21 Company Update - Vardhman Textiles - ICICI Direct

Vardhman Textiles' (VTL) revenues for Q3FY21 fell 4% YoY to Rs. 1750 crore. Gross margin improvement of 340 bps YoY to 48.3% and lower power cost (down 120 bps YoY to 9.9%) enabled EBITDA margin expansion of 421 bps YoY to 15.8%. EBITDA was up 31% YoY at Rs. 276 crore. Consequently, PBT grew 31% YoY to Rs. 219 crore. However, PAT fell 13% to Rs. 175 crore owing to deferred tax adjustment in the base quarter.

Valuation & Outlook

VTL's yarn business is witnessing strong demand while demand recovery for the fabric segment has picked up pace in Q3FY21. The management indicated that profitability in the yarn business has improved owing to higher yarn spreads, the impact of which could be visible in ensuing quarters. The yarn industry has also witnessed supply constraint owing to closure of ~6-7% of capacity due to stress faced by smaller players, which could benefit larger players like VTL. Vardhman is among the few textile companies that have been able to maintain a debt equity ratio below one despite continuous capacity addition. We expect VTL to capitalise on the emerging demand scenario owing to its strong balance sheet and long standing relationship with marquee clients. Improvement in margins on a sustainable basis is critical for enhancement of financial performance. We maintain HOLD rating with a revised target price of Rs. 1100 (7x FY23E earnings) (earlier TP: Rs. 740).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_VardhmanTextiles_CoUpdate_Jan21.pdf

Shares of VARDHMAN TEXTILES LTD. was last trading in BSE at Rs.1050 as compared to the previous close of Rs. 1057.75. The total number of shares traded during the day was 923 in over 215 trades.

The stock hit an intraday high of Rs. 1065.65 and intraday low of 1039.65. The net turnover during the day was Rs. 970540.

Source : Equity Bulls

Keywords