CRISIL assigns valuation grade of 5/5 to Aarvee Denims

741 Investors following Aarvee Denim. Share this News with them.

0

Like this story, share it with millions of investors on M3

CRISIL assigns valuation grade of 5/5 to Aarvee Denims

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.

Post your opinion here

 

0

Tweet

Share on Tumblr

Aarvee Denim BSE | NSE 31/05/12 Are Mutual Funds betting on Aarvee Denim?

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
• Aarvee's Q4 revenues grew by 55.8% y-o-y to Rs 1,462 mn driven by 17.6% volume growth and 39.4% realisation growth. The realisations of denim fabric increased from Rs. 90.5/kg in Q4FY10 to Rs 126.2/kg in Q4FY11 led by the steep price increase in its key input - cotton. For the full year, Aarvee's revenues grew by 31% y-o-y to Rs 4,949 mn.

• 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%.

Key developments
• The company has bought back US$3.5mn worth of FCCBs in Q4FY11. Post the repurchase, US$4 mn of the total US$20 mn bonds are outstanding.

• 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
We continue to use the price-to-earnings (PER) method to value Aarvee. Our fair value of Rs 75 per share merits a valuation grade of 5/5. We could revisit our estimates and fair value after interaction with the management, says CRISIL Research report.

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.

© CRISIL Limited . All Rights Reserved. Published under permission from CRISIL"

To read the full report click on the attachment