Sharekhan is bullish on Arvind has recommended buy rating on the stock with a target price of Rs 43 in its research report dated July 01, 2020.
Sharekhan's research report on Arvind
Q4FY2020 revenue fell by 11.7% y-o-y due to COVID-19 disruptions; revenue grew by 6.7% for January-February and OPM declined by just 27 bps to 9.6% in Q4FY2020 due to lower operating leverage (despite a significant fall in gross margins). Efficient working capital management helped Arvind reduce net debt by Rs. 248 crore in FY2020; we expect balance sheet to remain stable in FY2021 though operating performance is likely to be sluggish during H1FY2021. FY2021 to be impacted by COVID-19, faster recovery in export markets, good growth in garment volumes and sustained growth in AMD business will help company post good recovery in FY2022; soft cotton prices to help margins sustain.
We maintain our Buy rating with a revised PT of Rs. 43 due to discounted valuation of 6.6x its FY2022E earnings and 4.1x its FY2022E EV/EBITDA (trading at a discount of ~28% since its listing last year).
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