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Jun 02, 2011, 12.59 PM IST
CRISIL Research has come out with its report on Aarvee Denims & Exports. The research firm has initiated coverage on the company with a Valuation Grade of ‘5/5’ and has maintained the fair value of Rs 75 per share.
CRISIL Research has come out with its report on Aarvee Denims & Exports . The research firm has initiated coverage on the company with a Valuation Grade of ‘5/5’ and has maintained the fair value of Rs 75 per share.
Aarvee Denims & Exports Ltd’s (Aarvee’s) revenues were in line with CRISIL Equities’ expectations driven by strong growth in demand for denim fabric. However, margins were lower than estimated due to higher cotton costs and operating expenses. We will revisit our estimates post our interaction with the management. We maintain the fundamental grade of 3/5.
Q4FY11 result analysis
• EBITDA margin contracted by 470 bps y-o-y to 13.3% due to higher raw material and employee costs. Raw material expenses as a proportion of revenues increased from 56% in Q4FY10 to 63.5% in Q4FY11.
• Adj PAT margin declined by 248 bps y-o-y to 4.1% due to lower operational profitability.
• The company has declared a dividend of Re 0.5 per share. At the current market price, dividend yield is 1%.
• The proposed capacity expansion of 24 mn meters of denim fabric is on schedule. The commercial production of 12 mn meters commenced in March 2011, as planned. The second phase is expected to be completed by August 2011.
Valuations: Current market price has strong upside
Disclaimer: This report (Report) has been commissioned by the Company/Investor/Exchange and prepared by CRISIL. The report is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. Opinions expressed herein are CRISIL's opinions as on the date of this Report. The Data / Report are subject to change without any prior notice. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information of the authorized recipient only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person or published or copied in whole or in part especially outside India, for any purpose.
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