Mehabe score: 5 G Factor: 3 Piotski Score: 3 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 3.
Description
Vardhman textiles is engaged in the business of manufacturing Yarn, Fabric, Acrylic Fibre and Garments, the Group has over the years developed as a business conglomerate with a presence in India and in 75 countries across the globe. #
Main Points
Products
Yarn: They have Specialty Yarns, Dyed Yarns, Acrylic, Fancy & Hand Knitting Yarns, and Grey Yarns. #
Fabrics: engaged in the production of fabrics for both tops and bottoms in the apparel segment catering to a large number of retailers in the USA, Europe, and Asia amongst othersSite:VTLMain Symbol:VTL
Stock trades at 1899.0, above its 50dma 1486.39. It also trades above its 200dma 1205.06. The stock remains bullish on techicals
The 52 week high is at 2009.75 and the 52week low is at 622.05
Price Chart
P/E Chart
Sales and Margin
Strengths
– is expected to give good quarter
Weakness
– The company has delivered a poor sales growth of 0.98% over past five years.
– has a low return on equity of 9.10% for last 3 years.
-Dividend payout has been low at 12.56% of profits over last 3 years
-Debtor days have increased from 49.62 to 61.74 days.
Competition
– The industry trades at a mean P/E of 17.6x. RSWM Ltd trades at the industry’s max P/E of 43.52x. VTL trades at a P/E of 13.9x
– Industry’s mean G-Factor is 4.0 while the mean Piotski score is 8.0. VTL has a G-Factor of 3 and Piotski scoreof 3.
– Average 1 month return for industry is 46.6%. The max 1- month return was given by Rajapalayam Mill: a return of 64.89 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 1927.0 cr compared to Rs 817.0 cr for period ended Jun 2020, a rise of 135.9%
Company reported operating profit of Rs 479.0 cr for period ended Jun 2021, operating profit margin at 24.9 %.
Operating profit was negative for the same period last year thus company has improved its margins this year
The EPS for Jun 2021 was Rs 54.61 compared to Rs 42.3 for previous quarter ended Mar 2021 and Rs -11.18 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 7249.0 cr for period ended TTM vis-vis sales of Rs 6140.0 cr for the period ended Mar 2021, a healthy growth of 15.3%. The 3 year sales cagr stood at 1.8%.
Operating margins expanded to 18.0% for period ended TTM vis-vis 13.0% for period ended Mar 2021, expansion of 500.0 bps.
Net Profit reported at Rs 789.0 cr for period ended TTM vis-vis sales of Rs 410.0 cr for the period ended Mar 2021, rising 48.0%.
Company recorded a Net Profit CAGR of 2.6% over the last 3 years
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 had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 7.0% compared to 9.0% over the last 3 Years. – The stock has given a return of 198% on a 1 Year basis vis-vis a return of 16% over the last 3 Years. – The compounded sales growth on a TTM bassis is 23% vis-vis a compounded sales growth of -1% over the last 3 Years. – The compounded profit growth on a TTM basis is 99% vis-vis a compounded profit growth of -5% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 4.41% vis-vis 4.26% for Mar 2021 – Public shareholding has remained largely constant. The Jun 2021 public holding stood at 11.1% vis-vis 10.91% for Mar 2021
Conclusion
– is expected to give good quarter – The company has delivered a poor sales growth of 0.98% over past five years.
– has a low return on equity of 9.10% for last 3 years.
-Dividend payout has been low at 12.56% of profits over last 3 years
-Debtor days have increased from 49.62 to 61.74 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 1486.39 and is trading at 1899.0 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
