Buy Arvind; target of Rs 96: Ventura

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26 Aug, 2025 12:21

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Ventura is bullish on Arvind and has recommended buy rating on the stock with a target of Rs 96 in its May 11, 2012 research report.

“Arvind’s Net Sales of Rs 1272 crore (6.8% YoY) for Q3FY12 was marginally ahead of our expectations. Growth was led by strong performance witnessed across Brands & Retail business which registered a year on year growth of 58% in the current quarter. Impacted by write down of inventory cost due to fall in cotton prices for textile business, reduction in sales prices and absorption of high cost inventory for Branded and Retail business, OPM for the current quarter declined sharply by 240 bps to 10.3%. Despite a weaker operating performance, Net profit in current quarter grew by 5.8% YoY to Rs 67 crore primarily on account of higher other income (Rs 43 crore Q4FY12 vs Rs 4 crore Q4FY11). Other income in the current quarter included Rs 29 crore generated from monetization of land properties against Rs 0.5 crore reported in Q4FY11.”

“Aided by strong growth across both Textile and Brands and Retail business Net Sales for FY12 grew by 21.4% to Rs 4892 crore. Meanwhile, boosted by Rs 191 crore profit generated from disinvestment of VF JV Net Profit for the year under review grew by 164.4% to Rs 436 crore.   Volumes for denim in the current declined by 3% on YoY basis to 25.3 mn metres. However, aided by expanded capacity volumes shirting/khakhis business increased by 11% YoY to 18.3 mn metres. Considering the decline in cotton prices the company has guided for a lower in the realizations for FY13. Driven by capacity expansion in shirting/khakhis business and increased utilization of denim capacities the company intends to grow textile business volumes at the rate of 14-15% in FY13. Despite of reduction in sales prices, topline for Brands and Retail business grew by 58%on YoY basis to Rs 316 crore. However, OPM margin for the current quarter declined sharply by 420 bps YoY to 1.2% in current quarter as the company reduced sales prices and had to absorb higher cost inventory. As of Q4FY12, the number of distribution stores and key account centres stands at 568 and 327 respectively. On the back of absorption of high cost inventory and reduction in sales prices, we believe that operating margins of Brands and Retail business will remain under pressure in near term and can be restored in H2FY13 only.”

“During the current quarter under review, the Arvind Tata Housing JV has launched the 9 sqft township in Ahmadabad. As per the company, the deal is expected to generate a topline and bottom line of Rs 1800-2000 core spread over the next 4-5 year. Aided by robust brands and retail business growth and decent volume growth of textile business, Arvind has posted strong growth 21.4% growth in topline for FY12. Driven by capacity expansion in shirting/khakhis business and increased utilization of denim capacities the company intends to grow textile business volumes at the rate of 14-15% in FY13. Despite negative headwinds from cost inflation and weakening demand pattern, the company has guided for 15% volume growth for brands and retail business. However, on the back absorption of high cost inventory and reduction in sales prices, we believe that operating margins of Brands and Retail business will remain under pressure in near term and can be restored in H2FY13 only. On the back of robust brands and retail business growth, sustainable textile volumes and monetization of its real estate properties, we reiterate Arvind as a BUY with a 12 month price target of Rs 96 (8x FY13E PE), representing a potential upside of 23%. Given the short term softness anticipated we recommend accumulating the stocks on declines,” says Ventura research report. 

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