National brokerage firm ICICI Securities placed a buy call on Vardhman Textiles Ltd (VTL) for a target price of Rs 625 and a target period of 12 months. According to the brokerage, “The Company’s shares were split on March 24, 2022 (ex-date) pursuant to shareholder approval granted for the stock split at its March 11, 2022 meeting. The date of registration for the same was set for March 26, 2022. Subsequently, the shares of the company were divided, with the existing nominal value of Rs.10 being subdivided into five shares with a nominal value of Rs.2 each. , the stock fell from Rs 48.26 on March 26, 2021 to Rs 542.50 on March 25, 2022, 3:30 PM IST, showing a year-to-date multibagger return of 1,024.17%.YTD (YTD ), the stock has returned 443.26% and in the previous six months it has climbed 648.07%.The stock has returned 430.41% in the past month and 3.50% in the past five months. previous days.
Main investment rationale for Vardhman Textiles Ltd (VTL) according to ICICI Securities
- Global retailers are looking to de-risk their supply chains and VTL stands to benefit in the yarn and fabric segment.
- Strong demand coupled with supply constraints due to approximately 5-6% of capacity shut down due to the impact of the pandemic is expected to result in larger variances in yarn business.
- Due to high customer demand, the company is expanding its wire spindle capacity by installing 1,65,000 spindles with a capex of Rs 1400 crore. Moreover, it increases its capacity by 70,000 pins with a capex of Rs 600 crore.
- We model revenue and profit CAGR of 22% and 57%, respectively, in FY21-24E with a RoCE of approximately 16% in FY24E.
Buy for a target price of Rs 625
According to the brokerage “Despite being in the cyclical textile sector, VTL’s share price has appreciated at 16% CAGR over the past five years. We continue to remain structurally positive and maintain the buy rating. We value VTL at Rs 625, or 11x FY24E earnings.”
Pandemic-related restrictions may reduce sales and the high cost of RM may reduce margin remain the main risks for the stock according to ICICI Securities.
The security was selected in the brokerage report of ICICI Securities. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author, and the brokerage are not responsible for any losses caused as a result of decisions based on the article.
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Article first published: Friday, March 25, 2022, 4:34 p.m. [IST]