The inventory is predicted to maneuver greater and progressively head in the direction of Rs 1,532 in the approaching months, say consultants.
June 04, 2021 / 11:54 AM IST
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Vardhman Textiles Ltd, which has virtually doubled since June 2020, gained by about 10 p.c in May and about 20 p.c in 2021. The inventory is 6 p.c away from its 52-week excessive of Rs 1,384 recorded on May 25, 2021.
Vardhman, which has a market capitalisation of greater than Rs 7,500 crore, is on observe to hit a recent 52-week excessive and go previous 1,500 in the approaching months, an upside of about 18 p.c from June three closing.
The flagship firm of the Vardhman Group, Vardhman Textiles is an built-in textile producer that makes cotton yarn, artificial yarn, woven material, stitching thread, acrylic fiber, tow and clothes.
The textile sector is regaining momentum after a few months. In the textile area, ICICI Direct stays constructive on Vardhman Textiles as it’s forming the next base above its 50-day exponential transferring common (EMA).
“The 50-days EMA has been held since July 2020, and coincides with the multi-year breakout area of Rs 1,150, highlighting inherent strength in the stock. Hence, it offers a fresh entry opportunity,” Dharmesh Shah, Head – Technical, ICICI Direct, mentioned.
The inventory has been seeing a quicker tempo of retracement over the previous 4 quarters. It retraced 80 p.c of the previous 10 quarters decline, highlighting structural enchancment. A quicker tempo of retracement signifies a strong worth construction that augurs properly for the following leg of the upmove
The upmove since September 2020 has been captured in a properly-outlined upward sloping channel, indicating elevated shopping for demand.
“We expect the stock to resolve higher and gradually head towards the upper band of rising channel at Rs 1,532 in the coming months,” Shah mentioned.
The weekly-14 interval RSI has generated a purchase sign, thus validating constructive bias.
Fundamental View
Vardhman Textiles has one of many largest spinning capacities in India and is among the many largest home yarn producers, with a big presence in the export market
It reported a powerful monetary efficiency in Q4FY21, with a big enchancment in revenues and profitability.
Vardhman Textiles revenues for Q4FY21 grew 22% YoY to Rs 1947 crore. It additionally witnessed gross margin growth of 459 bps YoY to 53.1 p.c, which enabled an EBITDA margin growth of 610 bps to 20.2 p.c. PAT grew by 72 p.c YoY to Rs 250 crore.
“In spite of the tough demand scenario owing to the pandemic, VTL’s yarn business volumes exited FY21 with a recovery rate of around 98 percent of pre-Covid levels,” ICICI Direct mentioned in a word.
The material enterprise, which was a laggard in H1FY21 as a consequence of subdued demand in the home market, started to see robust demand and picked up tempo in Q4FY21, with material quantity progress returning to constructive territory with a 12 p.c YoY progress, the word mentioned.
The profitability in the yarn enterprise has improved as a consequence of greater yarn spreads and improved utilisation of material capability, which might additional support in EBITDA margin.
Vardhman is among the many few textile firms to keep up the debt-fairness ratio under one regardless of steady capability addition, the brokerage agency mentioned.
“We expect VTL to capitalise on the emerging demand scenario owing to its strong balance sheet and long standing relationship with marquee clients,” it mentioned.
Due to its robust stability sheet (FY21 debt/fairness of ~ zero.3x), the corporate is best positioned than friends to seize the expansion opportunity arising from the upper demand for textiles in home and international markets.
SMC Global Securities maintains a “buy” ranking on the inventory with a goal of Rs 1,487. The firm plans to develop its yarn capability by 1 lakh spindles with a capex of Rs 700 crore.
“It has indicated that the new capacity would be in Madhya Pradesh. Moreover, the management of the company expects to complete the project in the next 12 months. It has in place a strong, capable and experienced management team delivering results that drive the company ahead,” the report added.
Disclaimer: The views and funding suggestions expressed by consultants on Moneycontrol.com are their very own and never these of the web site or its administration. Moneycontrol.com advises customers to examine with licensed consultants earlier than taking any funding choices.
