Buy Arvind; target of Rs 92: Nirmal Bang

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26 Aug, 2025 12:21

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Nirmal Bang is bullish on Arvind and has recommended buy rating on the stock with a target of Rs 92 in its September 28, 2012 research report.

“Arvind caters to all segments of consumers - mass market, premium market and bridge to luxury market. However, its presence in bridge to luxury market was limited, with only two brands Gant and Energie. With the latest acquisition of brands (in India), particularly Nautica, its portfolio in bridge to luxury market will strengthen. Debenhams will enable Arvind to foray into bridge to luxury department stores and Next will facilitate entry into apparel specialty retail chain. This will strengthen Arvind’s market share in women and kids wear segment. The management has stated that apparel specialty segment is growing fast and the company is planning to compete with brands like Zara etc.”

“Next is UK-based most valuable retailer with ~US$5.3bn revenue and 500 stores in the UK and 180 stores spread across 30 countries. In India, Next started its operations in September 2006. Debenhams is UK’s leading lifestyle department store with ~US$3.4bn revenue and 169 stores in the UK and 66 international franchise stores in 25 countries. It offers a unique combination of own brands and international brands. Established in 1983, Nautica, with revenue of ~US$1.6bn, is a global lifestyle brand in the casual wear space with 200 stores spread across 70 countries.”

“Arvind trades attractively at 7.9x/6.6x FY13E/FY14E P/E and 5.8/5.1x EV/EBITDA, below the mean of 8.1x/6.5x, respectively. We have rolled forward our valuation to FY14 estimates from FY13 and reduced our target multiple for textile/B&R divisions to 5.0x/7.0x EV/EBITDA from 5.5x/8.0x, respectively, to factor in lower free cash flow and pressure on return ratios. Resuming operations after a strike by the workers recently, its textile plants are running at full capacity since 1 July 2012 and hence margins are expected to bounce back to 16.0% in 2HFY13 from 14.7% in 1QFY13, while its B&R division has witnessed improvement in margins as well as revenue on a sequential basis. According to the management, the value of its land after development will be around Rs10bn i.e. Rs39 per share. We have valued the land parcel at 25% (earlier 33%) of its net asset value of Rs39 in our target price. The management expects to receive Rs1.0bn-1.5bn cash flow from its real estate venture each year in FY13E/FY14E, which should support its cash flow. We have retained our buy rating on the stock with a revised SOTP-based TP of Rs92 (from Rs97 earlier),”says Nirmal Bang research report.

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