Textiles, Apparels & Acc. share price target

The textile industry in India has been overwhelmed in the past year with rising cotton prices, global retailers cancelling orders as a result of stockpiling, and some importers facing a foreign exchange crisis. However, the industry rebounded in the past month on hopes of a recovery.

On the cusp of a recovery

Growth to slow down in H2FY23; revival expected in FY24

Textile stocks, in the past one year, have witnessed a significant re-rating with readymade garment exporters (RMG) stocks like KPR Mills and Gokaldas Exports (GEL) rallying ~6x since our initiation reports. A material improvement in financial performance (RoCE for KPR improved 440 bps to ~24% in FY21), deleveraging of b/s (D/E for GEL declined from 0.9x to 0.5x) and robust order book for the companies have been key triggers for the re-rating. We continue to like KPR and GEL to play the structural long term story in the apparel export space owing to their strong business models and long standing relationships with marquee global clients....

Stitching together a growth story

GHCL's Q3FY19 revenue grew 21% yoy to Rs8.70bn (Emkay estimate: Rs8.06bn), driven by 11.5% yoy growth in Soda-ash and 42% yoy growth in the Textile segment which was largely driven by capacity expansion and realization improvement in the spinning business. EBITDA stood at Rs2.05bn, up 49% yoy on stable performance in the Soda-Ash segment and the Textile segment's turnaround. EBITDA margin expanded 439bps yoy to 23.6%,...

UTCEMs board has approved the acquisition of the cement division of CTIL, which has grinding capacity of 13.4mt (~11.4mt of integrated capacity, and a grinding unit of 2mt in West Bengal). We believe the acquisition value of USD106/t is attractive, given i) it is at a discount to the earlier acquisition value (of JPAs assets) by 7-8%, ii) the acquisition value is in line with UTCEMs capital cost for putting up its own capacity and iii) the acquisition value is at a deep discount to the recent bid for Binani Cement, although synergy values are different in case of Binani Cement. We believe the proposed acquisition of Century Textiles cement assets is positive as it allows UTCEM to increase its all-India capacity market share by 3pp in a very short time (nine months).

Our picks: KPR Mill Ltd, SiyaramSilk Mills Ltd, AmbikaCotton Mills Ltd

The Union Cabinet on June 22, 2016 gave its approval to a special package for promotion of exports and employment generation in the textile and apparel sector. The current sops are in line with the policy of...