ICICI Direct recommended hold rating on Vardhman Textiles with a target price of Rs 1240 in its research report dated May 17, 2017.
ICICI Direct's research report on Vardhman Textiles
Vardhman reported strong margins of 24% for Q2FY17, Q3FY17 on account of benefits of low cost cotton inventory. However, due to depletion of low cost inventory, margins for the quarter fell 420 bps YoY to 17.1%. Average cotton prices (Shankar-6) rose 26% YoY in Q4FY17 resulting in an increase in input costs.
We have revised our estimates downwards for FY18E and FY19E. We have a HOLD recommendation on the stock with a target price of Rs 1240, valuing the company at 5.5x FY19E EV/EBITDA.
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