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M e e t s e x p e c t a t i o n s ; v i e w r e m a i n s c a u t i o u s …
Vardhman Textiles’ (Vardhman) Q2FY12 numbers were in line with our
estimates. Net sales increased 14.0% YoY to | 1,035.0 crore led by strong
growth (25.8% YoY) in the yarn segment. The EBITDA margin came in
marginally lower than our estimates at 14.4% (I-direct estimate: 14.9%)
due to higher-than-expected trading activity. Though the operational
performance was weaker YoY (which was expected), it was far better
than that in Q1FY12 as the company booked the entire inventory loss in
Q1FY12 itself. Lower operating margin (14.4% in Q2FY12 vs. 24.4% in
Q2FY11) and higher interest cost led to a 69.2% YoY dip in PAT to | 35.8
crore (I-direct estimate: | 40.2 crore). Going forward also, the
management tone was cautiously positive considering lower yarn prices,
higher supplies and weaker demand. For H1FY12, net sales increased by
16.4% YoY. Vardhman’s H1FY12 loss still stands at | 7.3 crore as against
a profit of | 213.1 crore in H1FY11.
ƒ Segmental performance – Yarn segment performs well
Yarn: The yarn segment witnessed strong YoY growth of 25.8% and
30.3% during Q2FY12 and H1FY12, respectively. The yarn segment
sales increased to | 898.5 crore (Q2FY12) and | 1,742.2 crore
(H1FY12). However, the segmental EBITDA margin dipped from
24.8% in Q2FY11 to 12.3% in Q2FY12. Operating margin for the first
half touched a low of 6.3% (23.7% - H1FY11).
Fabric: Fabric segment sales increased 11.6% and 20.8% to | 288.1
crore and | 596.6 crore in Q2FY12 and H1FY12, respectively. The
segmental EBITDA margin remained flattish at 12.5% and 12.1% in
Q2FY12 and H1FY12, respectively (12.7% - Q2FY11 and 11.9% -
H1FY11).
V a l u a t i o n
At the CMP, the stock is currently trading at 16.3x and 9.7x FY12E and
FY13E EPS of | 12.1 and | 20.4, respectively. Considering lower yarn
realisations and the cautious management outlook, we have further
revised our EBITDA margin estimates downwards. Accordingly, our
revised target price stands at | 186 (based on an average arrived at by
assigning a multiple of 0.8x FY13E book value and 4.5x FY13E EPS)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
M e e t s e x p e c t a t i o n s ; v i e w r e m a i n s c a u t i o u s …
Vardhman Textiles’ (Vardhman) Q2FY12 numbers were in line with our
estimates. Net sales increased 14.0% YoY to | 1,035.0 crore led by strong
growth (25.8% YoY) in the yarn segment. The EBITDA margin came in
marginally lower than our estimates at 14.4% (I-direct estimate: 14.9%)
due to higher-than-expected trading activity. Though the operational
performance was weaker YoY (which was expected), it was far better
than that in Q1FY12 as the company booked the entire inventory loss in
Q1FY12 itself. Lower operating margin (14.4% in Q2FY12 vs. 24.4% in
Q2FY11) and higher interest cost led to a 69.2% YoY dip in PAT to | 35.8
crore (I-direct estimate: | 40.2 crore). Going forward also, the
management tone was cautiously positive considering lower yarn prices,
higher supplies and weaker demand. For H1FY12, net sales increased by
16.4% YoY. Vardhman’s H1FY12 loss still stands at | 7.3 crore as against
a profit of | 213.1 crore in H1FY11.
ƒ Segmental performance – Yarn segment performs well
Yarn: The yarn segment witnessed strong YoY growth of 25.8% and
30.3% during Q2FY12 and H1FY12, respectively. The yarn segment
sales increased to | 898.5 crore (Q2FY12) and | 1,742.2 crore
(H1FY12). However, the segmental EBITDA margin dipped from
24.8% in Q2FY11 to 12.3% in Q2FY12. Operating margin for the first
half touched a low of 6.3% (23.7% - H1FY11).
Fabric: Fabric segment sales increased 11.6% and 20.8% to | 288.1
crore and | 596.6 crore in Q2FY12 and H1FY12, respectively. The
segmental EBITDA margin remained flattish at 12.5% and 12.1% in
Q2FY12 and H1FY12, respectively (12.7% - Q2FY11 and 11.9% -
H1FY11).
V a l u a t i o n
At the CMP, the stock is currently trading at 16.3x and 9.7x FY12E and
FY13E EPS of | 12.1 and | 20.4, respectively. Considering lower yarn
realisations and the cautious management outlook, we have further
revised our EBITDA margin estimates downwards. Accordingly, our
revised target price stands at | 186 (based on an average arrived at by
assigning a multiple of 0.8x FY13E book value and 4.5x FY13E EPS)
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