Buy Vardhman Textiles, target price Rs 625: ICICI Direct

ICICI Direct has buy call on Vardhman Textiles with a target price of Rs 625. Time period given by analyst is 1 year when Tthe stock price can reach defined target.

Vardhman Textiles, incorporated in the year 1973, is a Mid Cap company (having a market cap of Rs 15662.39 Crore) operating in Textiles sector.

Investment Rationale

Vardhman is among the few textile companies that have been able to maintain a debt-equity ratio below one despite continuous capacity addition.

Shares of the company have been split on March 24, 2022 (ex-date) pursuant to the shareholder approval granted for sub-division of shares in its meeting held on March 11, 2022. The record date for the same has been fixed as March 26, 2022.

Subsequently, the shares of the company have been split with existing face value of Rs 10 being subdivided into five equity shares of Rs 2 face value each.

Despite being in the cyclical textile business, VTL’s stock price has appreciated at 16% CAGR in the last five years.
ICICI Direct continues to remain structurally positive and maintains BUY rating and values VTL at Rs 625 i.e. 11x FY24E earnings.

Key Risks: (i) Pandemic led restriction can lower sales, (ii) high RM cost can subdue margin

Financials
For the quarter ended 31-12-2021, the company has 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 has reported net profit after tax of Rs 422.18 crore in latest quarter.

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.