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P o s i t i v e s u r p r i s e : o p e r a t i n g ma r g i n s e x p a n d…
Vardhman Textiles’ (Vardhman) Q2FY12 numbers were a mixed bag.
While revenues came in lower than our expectations, the operating
margin and PAT were ahead of our estimates. In Q3FY12, revenues
remained flat (both sequentially and YoY) at | 984.0 crore (I-direct
estimate: | 1,173.1 crore). Unlike Q2FY12, this time the yarn segment
revenues remained flat (up 1.9% YoY) at | 827.6 crore (yarn segment
grew by 25.8% YoY in Q2FY12). Notably, the fabric segment revenues
(contributing 28% to the topline) grew by 16.6% YoY to | 319.7 crore.
The company positively surprised us on the EBITDA margin front.
Vardhman reported an EBITDA margin of 17.3% (up 282 bps higher
sequentially), 246 bps higher than our estimate on the back of lower raw
material expenses. However, due to a lower operating margin on a YoY
basis and higher interest costs, PAT halved from | 135.6 crore in Q3FY11
to | 60.3 crore in Q3FY12.
ƒ Segmental performance
Yarn: The yarn segment, which grew 25.8% in Q2FY12, posted flat
YoY growth in Q3FY12 (up 1.9% YoY). For nine months ended
December 2011, the yarn segment grew 19.6% to | 2,569.8 crore.
The segmental EBIT margin improved from 7.9% in Q2FY12 to 9.9%
in Q3FY12. Operating margin for the nine months ended December
2011 were lower at 4.4% due to the loss incurred in Q1FY12.
Fabric: In the fabric segment, sales increased by 16.6% and 19.3%
to | 319.7 crore and | 916.3 crore in Q3FY12 and 9MFY12,
respectively. The segmental EBIT margin also improved from 7.5%
in Q2FY12 to 11.8% in Q3FY12. For nine months ended December
2011, EBIT margins stood at 8.8%.
V a l u a t i o n
At the CMP, the stock is currently trading at 14.2x and 9.5x FY12E and
FY13E EPS of | 13.5 and | 20.4, respectively. Notably, the company has
come out of the difficult situation of Q1FY12 and reported better numbers
sequentially. We maintain a HOLD rating on the stock with a target price
of | 186 (based on an average arrived at by assigning a multiple of 0.7x
FY13E book value and 4.5x FY13E EPS).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
P o s i t i v e s u r p r i s e : o p e r a t i n g ma r g i n s e x p a n d…
Vardhman Textiles’ (Vardhman) Q2FY12 numbers were a mixed bag.
While revenues came in lower than our expectations, the operating
margin and PAT were ahead of our estimates. In Q3FY12, revenues
remained flat (both sequentially and YoY) at | 984.0 crore (I-direct
estimate: | 1,173.1 crore). Unlike Q2FY12, this time the yarn segment
revenues remained flat (up 1.9% YoY) at | 827.6 crore (yarn segment
grew by 25.8% YoY in Q2FY12). Notably, the fabric segment revenues
(contributing 28% to the topline) grew by 16.6% YoY to | 319.7 crore.
The company positively surprised us on the EBITDA margin front.
Vardhman reported an EBITDA margin of 17.3% (up 282 bps higher
sequentially), 246 bps higher than our estimate on the back of lower raw
material expenses. However, due to a lower operating margin on a YoY
basis and higher interest costs, PAT halved from | 135.6 crore in Q3FY11
to | 60.3 crore in Q3FY12.
ƒ Segmental performance
Yarn: The yarn segment, which grew 25.8% in Q2FY12, posted flat
YoY growth in Q3FY12 (up 1.9% YoY). For nine months ended
December 2011, the yarn segment grew 19.6% to | 2,569.8 crore.
The segmental EBIT margin improved from 7.9% in Q2FY12 to 9.9%
in Q3FY12. Operating margin for the nine months ended December
2011 were lower at 4.4% due to the loss incurred in Q1FY12.
Fabric: In the fabric segment, sales increased by 16.6% and 19.3%
to | 319.7 crore and | 916.3 crore in Q3FY12 and 9MFY12,
respectively. The segmental EBIT margin also improved from 7.5%
in Q2FY12 to 11.8% in Q3FY12. For nine months ended December
2011, EBIT margins stood at 8.8%.
V a l u a t i o n
At the CMP, the stock is currently trading at 14.2x and 9.5x FY12E and
FY13E EPS of | 13.5 and | 20.4, respectively. Notably, the company has
come out of the difficult situation of Q1FY12 and reported better numbers
sequentially. We maintain a HOLD rating on the stock with a target price
of | 186 (based on an average arrived at by assigning a multiple of 0.7x
FY13E book value and 4.5x FY13E EPS).
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