Buy Nitin Spinners; target of Rs 96: East India Securities

East India Securitie's report on Nitin Spinners

Nitin Spinners Ltd (Nitin) came out with an excellent set of numbers, way above estimates for Q2FY21 as operations got back on track, despite challenging environment. Supported by a well-diversified geographical reach the company registered a sales growth of 14.6% YoY to Rs4,269 mn on account of 12.3%, 11.9% & 37.3% growth in Yarn, Knitted Fabrics & Woven Fabrics segment respectively. Although realization in Yarn & Knitted Fabrics segment was down 5.3% & 5.8% YoY, gross margin of overall business improved by 371 bps YoY because of higher correction in cotton prices and contributions from the new woven fabric division. EBITDA grew by 57.7% YoY to Rs554 mn, with 355 bps margin expansion. Nitin is set to hit ~95%-100% capacity utilization, Q3FY21 onwards. The company has come back with strong set of performance and with Yarn prices firming up margin performance is set to improve further in the coming quarters.

Outlook

We continue to maintain our BUY rating on the stock of the company with a target price of Rs96 per share, 8xFY22e EPS.

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