Buy Arvind, recommends Ventura

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26 Aug, 2025 12:21

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Ventura's research report on Arvind

In Q1FY14, Arvind registered a robust revenue growth of 28.9 percent YoY to Rs 1491 crore in Q1FY14 on the back of healthy volumes (Denim - 6.4 percent YoY; Woven – 25.9 percent YoY) after adjusting for strike witnessed last year. EBIDTA margins expanded by 180 bps YoY to 13.8 percent on the back of improvement across all the verticals. PAT reported a whopping growth of 108.3 percent to Rs 67.6 crore from Rs 32.5 crore in Q1FY13. However, when adjusted for strike in corresponding quarter; revenue, EBITDA & PAT grew by 19 percent, 25 percent & 21 percent YoY respectively.

On the textile business front, the revenue grew 26 percent YoY (13.2 percent YoY adj) to Rs 1071 crore on the account of higher volumes and price growth across segment. Wovens & Denim grew by 33.0 percent and 30.5 percent YoY to Rs 415 crore and Rs 462 crore respectively. This growth largely led by ~33 percent and ~28 percent volume growth to 24.8 mn mtrs and 26.6 mn mtrs respectively. Revenues from Knits & Garments were flat at Rs 36 crore and Rs126 crore while Voiles grew by 28 percent YoY to Rs 86 crore. EBITDA margins from this business grew by 190 bps YoY to 17.7 percent.

Over the same period, brands & retail business grew by 34 percent YoY to Rs 368 crore owing to ~40 percent revenue growth in Brands (~26 percent growth excl. newly acquired brands) and ~19 percent revenue growth in MegaMart Retail. On the like to like basis, Brands & MegaMart Retail registered a ~9 percent and ~14 percent growth respectively. On the brand business, the company witnessed EBITDA loss at 1.6 percent due to promotional expenses while combined EBITDA margin improved 110 bps YoY to 2.5 percent. Adjusting for newly acquired brands, EBIDTA margin was ~4.1 percent over 1.4 percent in Q1FY13.

Other income was reported at Rs 18.6 crore (incl. Rs 8 crore profit from land sale). Moreover, it reported an exceptional outflow of Rs 11.8 crore towards VRS payments (reduced 317 workers' strength through VRS scheme). The management has maintained its guidance of achieving a revenue growth of ~20 percent+ on account of volume growth in both Textiles (12-15 percent) and Brands & Retail (25 percent+) in FY14.

Arvind's margins have continued to show improvement and stability and it is likely to post similar margins in Q2FY14 on the back of volume growth. Also, the management has maintained the guidance of ~20 percent revenue growth on the back of robust growth from the textile business (12 percent-15 percent) and brand & retail business (25 percent+). Besides, it expects International demand for textiles to remain strong. On this backdrop, we reiterate Arvind Ltd as a BUY with a 15 month price target of Rs 122 (8x FY15E EPS), representing a potential upside of 62 percent. At the CMP of Rs 70, the stock trades attractively at a PE of 6.2x and 4.9x its FY14 and FY15 earnings. Buy the stock," says Ventura Securities research report.

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