Textile stocks: Buy spinning mills, garment manufacturers

Among textiles companies across the various value chains, investors should look at buying stocks of spinning mills and garment-manufacturing companies. Factors such as rupee devaluation, firm demand from China, removal of excise duty and reasonably good demand in the US and Europe are likely to increase the revenue of these companies in the second half of the current fiscal.


In the past six months, cotton yarn prices (40s cone) have gained close to 30% versus a meagre 4% growth in raw cotton prices. This surge, caused by increasing demand from China and the rupee’s devaluation, has lifted the financial performance of most spinning mills in the quarter ended March.


Vardhman Textiles, RSWM, Sutlej Textiles, Suryajyoti Mills, and Nahar Spinning Mills have recorded almost two-times growth and 10-20% growth in their net revenues. Vardhman Textiles, one of the largest yarn makers, showed a two-fold jump in net profit to Rs 115 crore. Traditionally, these companies do good business in the second half of a fiscal due to festivals and increased spending in the US and Europe. This should provide a good opportunity for investors to buy into the stocks of spinning mills and garment-manufacturing companies.