Investment Idea - ALOK IND Strong BUY by Anand Rathi

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ALOK IND

CMP 23.10

Strong BUY.

FII’s Holding, Pledged share & outlook  update

According to latest holding pattern filings, the FII’s have increased their holding in the company from 11.41% in June’10 quarter to 20.38% in Sept.’10 quarter. That’s a hefty increase of 9% by FIIs, indicating strong interest of FIIs in this textile giant.

Further as per our information [data available to us], the promoters, [who are holding 28.3% stake]; were able to release around 42% pledged stocks [earlier 100% of promoters stake was pledged] and it is very likely that they will be able to get more stocks released from lender’s clutched, as textile markets will improve further.

The market outlook for textiles, particularly for Polyster Yarn & Fabrics is improving very fast with increasing demand from global and domestic markets and better realisations. It is interesting to note that – Chinese domestic demand is also very strong leading to reduced Chinese supplies in global markets. This is leading to Indian players grabbing higher export market with better realizations..

Company is also planning inn investing further Rs. 900 crs over the next 2 years in increasing capacity in terry towels, bed sheets &   polyester capacity ( doubling to 4 lakh tons a year by Decemeber). The order book is running full for the company as demand is robust globally and with improving competitiveness vis a vis China, the supplies to global markets is growing at a fast pace. The realizations are also growing in Polyster as differentials between cotton and polyster is rising sharply, with high cotton prices, This will push the margins also in to higher orbit.

It is also going in for increasing exports big time targeting 2500 cr exports from 1500cr in FY10. Along with various products, it is also exporting polyester yarn in big way.

We expect company to report, superior results for second half and we may revise upwards our earnings estimates, post Sept quarter results. Meanwhile we suggest strong buy in stock, with short term target of Rs 27/- and medium term target of Rs 32/-. BUY.