Buy Vardhman Textiles, target price Rs 3030: HDFC Securities

HDFC Securities has buy call on Vardhman Textiles with a target price of Rs 3030. The current market price of Vardhman Textiles is Rs 2556.3. Time period given by analyst is six months when Vardhman Textiles Ltd. price can reach defined target.

Vardhman Textiles Ltd., incorporated in the year 1973, is a Mid Cap company (having a market cap of Rs 14750.91 Crore) operating in Textiles sector.

Vardhman Textiles Ltd. key Products/Revenue Segments include Yarn, Fabric, Export Incentives, Others, Service Income for the year ending 31-Mar-2020.



Financials
For the quarter ended 31-12-2021, the company reported a Consolidated Total Income of Rs 2666.80 Crore, up 8.74 % from last quarter Total Income of Rs 2452.54 Crore and up 47.59 % from last year same quarter Total Income of Rs 1806.85 Crore. Company reported net profit after tax of Rs 422.18 Crore in latest quarter.

Investment Rationale
The brokerage are positive on the future earnings growth trajectory of VTL. It expects Revenue/EBITDA/PAT growth of 20/40/53% over FY21-FY24 driven by strong demand and increased capacities gradually coming on stream. EBITDA margins are likely to compress from the current unsustainable levels but would remain at the upper end of the 18-22% guidance given by the management. It believes investors could buy the stock in Rs 2580-2620 band and add on dips to Rs 2230-2270 band (8.5x Dec-23E EPS) for base case fair value of Rs 2770 (10.5x Dec-23E EPS) and bull case fair value of Rs 3030 (11.5x Dec-23E EPS) over the next 2 quarters.

Promoter/FII Holdings
Promoters held 63.15 per cent stake in the company as of 31-Dec-2021, while FIIs owned 6.3 per cent, DIIs 18.84 per cent.