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Chola Securities
Arvind (Buy)
CMP: ₹48.3
Target: ₹63
Arvind is the flagship company of the Lalbhai Group, established in 1931. Arvind’s business is broadly classified into Textiles, Brand & Retail and others. Textiles, brand and retail which accounts for 55 per cent , 39 per cent and 6 per cent of the revenue respectively. In India, Arvind sells international brands such as Arrow, US Polo Associate, Tommy Hilfiger (JV brand), Calvin Klein (JV brand), IZOD, Elle, TCP, Cherokee, GANT, Hanes, GAP, Wonderbra, Ed Hardy, Geoffrey Beene, Nautica etc.
In 1QFY20, consolidated revenue grew a modest 4.8 per cent y-o-y to ₹1,890 crore. Revenue growth was lead by 31 per cent y-o-y growth in advance material business segment and 4 per cent y-o-y growth in textiles business segment. Growth in textiles segment was driven by a 20 per cent growth in garments volume while denim exports continued to decline on y-o-y basis.
Valuation: At CMP the stock is quoting at 4.6XFY20E and 4.6XFY21E earnings respectively. We rate Arvind as a ‘buy’ with a target price of ₹63 per share based on 6X FY21E earnings.
Risks: Unfavourable currency movement; delay in capacity expansion; slowdown in domestic and export markets.
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