Positive on yarn space; Vardhman Spinning and Textiles a buy: Manish Sonthalia, Senior VP, Motilal Oswal Securities

Manish Sonthalia, Senior Vice President-Fund Manager, Motilal Oswal Securities in an interview with ET Now talks about agro commodity stocks.

ET Now: Do you own any agro commodity stock?

Manish Sonthalia: This is going to be quite positive for the yarn guys the companies who are actually into the yarn space because now that we have an increase in cotton prices out here obviously given the inventory situation of each of these yarn manufacturers their margins are going to shape up positively. So one name which we like and we have it in our portfolios as well is Vardhman Spinning and Textiles. So last year we saw an average margins of around Rs.70 per kg in the cotton side but this year because cotton prices have been pretty high and they have been with large inventories, we are looking at cotton yarn margin of closer to around Rs. 50 per kg. Now that cotton prices MSP has moved up I think the yarn guys will also follow through increase their prices. So this could have a positive impact on cotton yarn margins and the stock is available pretty cheap at around five times current year earning which is FY12. So that looks like a good bet.