Mehabe score: 3 G Factor: 3 Piotski Score: 4 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 3 and Piotski score of 4.
Description
Arvind Limited (‘the Company’) is one of India’s leading vertically integrated textile company with the presence of almost eight decades in this industry. It is among the largest denim manufacturers in the world. It also manufactures a range of cotton shirting, denim, knits and bottom weights (Khakis) fabrics and Jeans and Shirts Garments. #
Main Points
Global Presence
The company supplies fabrics in India and across the world. It earns 56% of its revenues from India while the rest 44% revenues come from its key export markets of USA, UK and the European Union. #Site:ARVINDMain Symbol:ARVIND
Stock trades at 105.0, above its 50dma 86.13. It also trades above its 200dma 66.45. The stock remains bullish on techicals
The 52 week high is at 112.10 and the 52week low is at 27.50
Price Chart
P/E Chart
Sales and Margin
Strengths
– has reduced debt.
-Stock is trading at 1.00 times its book value
Weakness
– has low interest coverage ratio.
-Promoter holding has decreased over last quarter: -2.44%
-The company has delivered a poor sales growth of -8.73% over past five years.
-Tax rate seems low
– has a low return on equity of 4.01% for last 3 years.
-Dividend payout has been low at 7.62% of profits over last 3 years
-Debtor days have increased from 58.76 to 78.55 days.
Competition
– The industry trades at a mean P/E of 17.0x. Arvind Ltd trades at the industry’s max P/E of 1200.31x. ARVIND trades at a P/E of 1200.0x
– Industry’s mean G-Factor is 4.1 while the mean Piotski score is 8.0. ARVIND has a G-Factor of 3 and Piotski scoreof 4.
– Average 1 month return for industry is 38.6%. The max 1- month return was given by Rajapalayam Mill: a return of 53.04 %
Quarterly Results
Sales for period ended Mar 2021 is Rs 1655.0 cr compared to Rs 1642.0 cr for period ended Mar 2020, a rise of 0.8%
Operating Profits reported at Rs 208.0 cr for period ended Mar 2021 vis-vis 157.0 for period ended Mar 2020 .
Operating Margins expanded 300.6 bps for period ended Mar 2021 vis-vis Mar 2020 .
The EPS for Mar 2021 was Rs 2.05 compared to Rs 0.96 for previous quarter ended Dec 2020 and Rs -0.48 for Mar 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 5073.0 cr for period ended Mar 2021 vis-vis sales of Rs 7369.0 cr for the period ended Mar 2020, a fall of 45.3%. The 3 year sales cagr stood at -9.3%.
Operating margins shrank to 9.0% for period ended Mar 2021 vis-vis 10.0% for period ended Mar 2020, contraction of 100.0 bps.
Net Profit reported at Rs -17.0 cr for period ended Mar 2021 vis-vis sales of Rs 96.0 cr for the period ended Mar 2020, falling 0%.
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has worsened on its Return on Equity (RoE) metric. The RoE on Last Year basis was 0.0% compared to 4.0% over the last 3 Years. – The stock has given a return of 239% on a 1 Year basis vis-vis a return of -11% over the last 3 Years. – The compounded sales growth on a TTM bassis is -31% vis-vis a compounded sales growth of -9% over the last 3 Years. – The compounded profit growth on a TTM basis is -98% vis-vis a compounded profit growth of -81% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 15.22% vis-vis 15.24% for Mar 2021 – Public shareholding has risen for the period ended Jun 2021. The Jun 2021 public holding stood at 35.96% vis-vis 33.33% for Mar 2021
Conclusion
– has reduced debt.
-Stock is trading at 1.00 times its book value – has low interest coverage ratio.
-Promoter holding has decreased over last quarter: -2.44%
-The company has delivered a poor sales growth of -8.73% over past five years.
-Tax rate seems low
– has a low return on equity of 4.01% for last 3 years.
-Dividend payout has been low at 7.62% of profits over last 3 years
-Debtor days have increased from 58.76 to 78.55 days.
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 86.13 and is trading at 105.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
