- 24 Jan 2022
- ICICIdirect Research
VARDHMAN TEXTILES REPORTS STRONG OPERATIONAL PERFORMANCE
VTL - 508 Change: -0.20 (-0.04 %)News: Vardhman Textiles reported strong operational performance for Q3FY22 with all time high revenues. Sales increased by 49% YoY to Rs.2603 crore (QoQ growth of 9%). Gross margin improvement of 405 bps YoY to 52.4% (QoQ decline of 350 bps on an exceptionally high base owing to use of low cost inventory) and operating leverage led to EBITDA margin expansion of 800 bps YoY to 23.8% (QoQ decline of 460 bps). EBITDA was higher by 124% YoY at Rs.619 crore. Consequently, PAT grew by 145% YoY to Rs.429 crore.
Views: Yarn realisations have improved significantly in last few quarters benefiting cotton spinners like Vardhman . The yarn market is witnessing supply constraint due to smaller capacities being shut down, benefiting larger players like Vardhman. On the export front, China + 1 strategy of global retailers is fuelling growth for players with large capacities in countries like India, Bangladesh and Pakistan. Vardhman is currently executing an expansion plan of 165000 spindles to take its capacity to 1365000 spindles. On the back of strong sustained demand, the company has now further decided to increase the capacity by additional 70000 spindles (capex of Rs. 600 crore) with total spindle capacity expected to reach ~ 14.4 lakh spindles over next three years. The expansion is planned to be funded by a mix of internal accrual and debt. Due to its strong b/s (FY21 D:E of 0.3x) it is better placed than peers to benefit from the current market scenario. Further, the Board of Directors have approved the split/ sub-division of equity shares of the company from face value of Rs.10/- per share to Rs.2/- per share, subject to the approval of shareholders.
Impact: Positive