Vardhman Textiles Q3 Review - Soft Raw Material, Better Capacity Utilisation Drive Profitability: Systematix

NDTV Profit’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 NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Systematix Report.Vardhman Textiles Ltd.'s Q3 FY24 revenue fell 1.7% YoY and 2.8% QoQ to Rs 23.3 billion (6% lower than our estimate). Sale volumes of Yarn/Grey/Processed fabric grew 17%/12%/13% YoY, respectively, on a low base and improving demand momentum.Gross margin expanded 586 basis point YoY and 320 bps QoQ to 42.9% due to lower raw material prices. Ebitda margin expanded 295 bps YoY and 192 bps QoQ to 10.5% (our estimate 9%), supported by higher utilisation in value-added products such as melanges.Ebitda increased 37% YoY and 19% QoQ to Rs 2.4 billion, 9% above our estimate of Rs 2.2 billion. Reported profit after tax grew 58.5% YoY and 18.2% QoQ to Rs 1.5 billion, versus our estimate of Rs 1.4 billion.Management indicated that lower capacity utilisation in the spinning segment is only 75-80% as against normal utilization levels of greater then 90% would continue to stifle margins. The company would be able to achieve topline growth only if yarn prices improve.We have factored in weak 9MFY24 performance and cut our FY24 earnings by 4%, but have raised FY25E earning per share by 6%, as we expect margins to improve on the back of soft cotton prices and better capacity utilisation in fabric.We roll forward our valuations to FY26E and revise our rating to 'Buy' from HOLD. Our target price of Rs 469 (Rs 360 earlier) is based on 10 times FY26E price earning (unchanged). Key risks:slower-than-anticipated demand recovery in India and the US,lower availability of cotton andlower realisations in yarn..Click on the attachment to read the full report:.International Holocaust Remembrance Day 2024: Date, History And Significance.DISCLAIMERThis report is authored by an external party. NDTV Profit 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 NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Vardhman Textiles Q3 Review - Soft Raw Material, Better Capacity Utilisation Drive Profitability: Systematix

Yarn sales volumes grew at 17% YoY to 63,048 mt (fell 9% QoQ) on low base and improved demand.

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