Buy Arvind; target of Rs 164: Sharekhan

Sharekhan's research report on Arvind

As anticipated, Arvind posted soft performance in Q1FY2024, with revenues declining by 18% y-o-y to Rs. 1,853.3 crore and adjusted PAT fell by 36% y-o-y to Rs. 68.7 crore. EBITDA margin improved by 37 bps y-o-y to 9.7%. U.S. demand is soft but has not fallen off the cliff; EU/UK has bottomed out. In India, the festive season orders should begin from next month. Overall, Q2 is expected to be better than Q1. However, stark improvement is expected in H2FY2024. The balance sheet remains stable with Rs. 123 crore reduction in long-term debt (overall debt reduced by Rs. 26 crore). The company is on track to execute its capex plan of Rs. 600 crore over the next two years.

Outlook

We upgrade our rating on Arvind Limited to Buy from Hold with a revised PT of Rs. 164 on account of improving outlook in the exports market and attractive valuation at 8.3x/6.2x its FY2024E/FY2025E EPS.