Vardhman Textiles Q2 Results Review - Capacity Utilisation, Demand Revival To Improve Margins: Systematix

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Systematix Research Report.Vardhman Textiles Ltd.’s Q2 FY24 revenue increased 3% QoQ but dropped 3% YoY to Rs 24 billion, in line with our estimate. Sale volumes in yarn rose by 34% YoY (+9% QoQ), that of grey fabric by 15% YoY (+22% QoQ), while volume of processed fabric stayed flat YoY (+21% QoQ). Gross margin rose 88 basis points QoQ, but contracted 370 bps YoY to 39.7%; Ebitda margin fell 73 bps QoQ and 593 bps YoY to 8.6% (our estimate 11.5%). Ebitda fell 43% YoY to Rs 2 billion, versus our estimate of Rs 2.8 billion, due to 50% and 36% lower profitability in the textile and acrylic fibre segments. Reported profit after tax slipped 34% YoY and 14% QoQ to Rs 1.4 billion, versus our estimate of Rs 1.6 billion. Key growth drivers for H2 FY24: Ongoing festive season in India,inventory destocking in the UK,spring-summer season demand surge in the U.S., andimprovement in cotton-yarn spread. A weak Q2 FY24 performance has led us to cut our FY24 earnings by 15%, but we have retained EPS for FY25E. We reiterate 'Hold' on Vardhman Textiles with an unchanged target price of Rs 360, based on 10 times FY25E price/earning. Key risks: slower-than-anticipated demand recovery in India and the U.S.,lower availability of cotton andhigher cotton prices..Click on the attachment to read the full report:.Arvind Fashions - Exit From Non-Core Sephora Business Makes It A Pure-Play Branded Apparel Play: Systematix.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Vardhman Textiles Q2 Results Review - Capacity Utilisation, Demand Revival To Improve Margins: Systematix

Management is focused on expanding its modernisation capacities and has planned a capex of ~Rs 3-4 billion for the next two years

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