CLSA maintains ‘Buy’ on Arvind, raises target price

MUMBAI: CLSA has raised its target price on Arvind to Rs 538 from Rs 440 while maintaining its ‘buy’ rating. The brokerage said the proposed demerger of brands and retail (B&R) from the parent company should help create value. The stock rose 3.3% to close at Rs 445.65 on Monday “The B&R business appears to be at an inflexion point with the company expecting most brands exiting FY18 to have positive operating profit,” the brokerage said in a client note.

“In textiles, the focus is shifting in favour of high-asset turn and technology-driven expansion.”

The brokerage said value unlocking will be dependent on the brands and retail business being able to fund its own growth.

CLSA said Arvind’s textiles business has been steadily shifting to its less capital-intensive garmenting division with a reduced focus on commodity denims.

“Incremental capital expenditure would be restricted to businesses with high asset-turnover (garmenting) and technology related areas (advanced materials) which should help expand the return on capital employed,”the brokerage said.

The stock gained 3.29% to close at Rs 445.65 at the BSE on Monday.