Buy Vardhman Textiles; target of Rs 375: IIFL

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IIFL is bullish on Vardhman Textiles and has recommended buy rating on the stock with a target of Rs 375 in its September 3, 2010 research report.

"Vardhman Textiles (VTL), India's largest yarn manufacturer, is one of the best-placed to benefit from the rise in yarn realisations (up ~60% in 15 months), thanks to a benign cost environment (cotton prices in India are up only 20% in 15 months, thanks to a bumper crop). Continued expansion in EBITDA margins on yarn (>200bps YoY), coupled with the company's planned capacity expansion by 20%+ over the next two years, should support a re-rating of the stock to 8x 1-year forward PE (near its historical average multiple). Accordingly, we set a 1-year-forward target price of Rs 374 and initiate coverage with a BUY," says IIFL research report.

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