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ARVIND LTD.
Change in revenue mix like focusing on lifestyle brands and retail
format; has improved realizations which may prove beneficial for
the bottom line of the company going forward. Also the industry
growth and change in preferences for the consumers is also a
driving force for the company.
Arvind Ltd. is the largest cotton textiles manufacturer in the country
with an installed fabric capacity of over 200mn meters per annum and
hence enjoys a considerable advantage of scale over its competitors.
It is also one of the leading denim fabric manufacturers in the world.
They are having their production facilities at Ahmedabad, Mehsana,
Gandhinagar in Gujarat, Pune in Maharashtra and Bangalore in
Karnataka.
Arvind’s strategy in its value retail business, Megamart, is entirely
different from other players in the segment such as ‘Brand Factory’
and ‘The Loot’ as it does not have to rely on other companies for its
merchandise.
Due to in-house production of yarn, the company has been able to
source yarn at a 20% cheaper rate than its peers who procure the
same from the market and therefore can control the input cost.
Arvind has made massive investments in building scale, sales and
distribution, designing, brand creation, and also in setting up its own
retail network which is supporting the margins for the company. Also
the early focus on domestic retail segment has translated to a healthy
lead over competitors for Arvind.
The domestic textiles industry is expected to grow from Rs 3,680bn
in 2010E to Rs 10,320bn by 2020, which implies a CAGR of over
10.8% for the sector. Indian textiles exports are expected to clock a
CAGR of ~12% and should reach Rs 3,760bn from the current Rs
1,220bn. This growth is the potential for the company in the coming
years.
The company is having the rights to market international brands
such as Lee, wrangler, Arrow and Tommy Hilfiger in India. The
company has also owns popular brands such as Mega Mart, Newport,
Flying Machine, Excalibre and Ruf & Tuf.
Valuation :At the CMP of Rs 63, the stock is trading at 14.28x
and 10.46x its FY11E & FY12E earnings of Rs. 4.41 & 6.02
respectively. Our 12 month target price is 85. Stock have upside
potential of 35% at current market price.
The company with the market cap of Rs. 1600crs and better outlook going forward is
expected to maintain ~ 16-16.5% growth in the top line.EBITDA margins are expected to be
maintained at 13.5-14.5%. But debt on books may be a cause of concern for maintaining the
margins.The first half of the company has shown a better performance with better realizations and
margins.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
ARVIND LTD.
Change in revenue mix like focusing on lifestyle brands and retail
format; has improved realizations which may prove beneficial for
the bottom line of the company going forward. Also the industry
growth and change in preferences for the consumers is also a
driving force for the company.
Arvind Ltd. is the largest cotton textiles manufacturer in the country
with an installed fabric capacity of over 200mn meters per annum and
hence enjoys a considerable advantage of scale over its competitors.
It is also one of the leading denim fabric manufacturers in the world.
They are having their production facilities at Ahmedabad, Mehsana,
Gandhinagar in Gujarat, Pune in Maharashtra and Bangalore in
Karnataka.
Arvind’s strategy in its value retail business, Megamart, is entirely
different from other players in the segment such as ‘Brand Factory’
and ‘The Loot’ as it does not have to rely on other companies for its
merchandise.
Due to in-house production of yarn, the company has been able to
source yarn at a 20% cheaper rate than its peers who procure the
same from the market and therefore can control the input cost.
Arvind has made massive investments in building scale, sales and
distribution, designing, brand creation, and also in setting up its own
retail network which is supporting the margins for the company. Also
the early focus on domestic retail segment has translated to a healthy
lead over competitors for Arvind.
The domestic textiles industry is expected to grow from Rs 3,680bn
in 2010E to Rs 10,320bn by 2020, which implies a CAGR of over
10.8% for the sector. Indian textiles exports are expected to clock a
CAGR of ~12% and should reach Rs 3,760bn from the current Rs
1,220bn. This growth is the potential for the company in the coming
years.
The company is having the rights to market international brands
such as Lee, wrangler, Arrow and Tommy Hilfiger in India. The
company has also owns popular brands such as Mega Mart, Newport,
Flying Machine, Excalibre and Ruf & Tuf.
Valuation :At the CMP of Rs 63, the stock is trading at 14.28x
and 10.46x its FY11E & FY12E earnings of Rs. 4.41 & 6.02
respectively. Our 12 month target price is 85. Stock have upside
potential of 35% at current market price.
The company with the market cap of Rs. 1600crs and better outlook going forward is
expected to maintain ~ 16-16.5% growth in the top line.EBITDA margins are expected to be
maintained at 13.5-14.5%. But debt on books may be a cause of concern for maintaining the
margins.The first half of the company has shown a better performance with better realizations and
margins.
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