Textile companies recorded healthy YoY performance with revenue/Ebitda/PAT up 11%/11%/28% YoY on improved volumes and stable realizations. Subdued cotton (down 10% YoY and up 2% QoQ) and stable yarn prices aided YoY gross margin expansion for spinners.
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Systematix Research Report
The aggregate Q3 revenue of the four textile companies under our coverage Gokaldas Exports Ltd., KPR Mills Ltd., Vardhman Textiles Ltd and Welspun Living Ltd., increased by 13% YoY but fell 5% QoQ, broadly in line with our estimate.
Ebitda margins of companies within our coverage were flat YoY and contracted 30 bps QoQ due to higher raw material and freight costs faced by HT and garmenting companies, even as spinners witnessed healthy margin expansion.
Aggregate Ebitda rose 13% YoY but fell 8% QoQ, with APAT up 37% YoY and 16% QoQ, largely contributed by 31% YoY growth in Vardhman Textiles' PAT and 65% YoY growth in Gokaldas Exports' PAT (due to consolidation of acquired entities). We have cut our earnings for Vardhman Textiles (on weak spread), Welspun Living and Gokaldas Exports on higher raw material and freight and logistics costs, resulting from the ongoing Red Sea crisis.
Top picks: Vardhman Textiles (Buy) and Gokaldas Exports (Buy).
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