Multibagger Alert: This Textile company has given investors a return of 136% in the past year

resr 5paisa Research Team

Last Updated: 15th December 2022 - 12:09 pm

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On a YTD basis, the stock has given a return of 87.63%.

One of the largest domestic yarn producers in India, Vardhman Textiles has given investors stellar returns of 136.44% over the last year. The share price stood at Rs 860.65 on November 17, 2020, and since then, the stock has more than doubled investor wealth.

Vardhman Textiles, formerly known as Mahavir Spinning, is part of the Vardhman Group, a large textile conglomerate with a presence across the textile value chain. Vardhman is among the few textile companies that have been able to maintain a debt-equity ratio below one despite continuous capacity addition. Its healthy cash flows have enabled the company to reduce debt by around Rs 152 crore in FY21. In the same period, the debt to equity ratio of the company stood at 0.3x.

The company reported its highest quarterly revenue and PAT numbers in Q2FY22. During the latest quarter, revenue grew 47% YoY and 24% QoQ to Rs 2385 crore. Gross margin expanded on a QoQ basis by 107 bps to 55.9%, while operating leverage led to EBITDA margin expansion of 1946 bps YoY (on a low base last year) and 360 bps QoQ to 28.4%. EBITDA was higher by 3.7x YoY and was reported at Rs 676 crore. Consequently, PAT grew by 7.6x YoY to Rs 481 crore.

Vardhman Textiles has a project Capex plan of Rs 1900 crore over FY22-23 for yarn capacity expansion with Rs 700 crore for ongoing expansion of 1,00,000 spindles. The company also plans to further expand its spindle capacity by 1,65,000 and would be incurring a Capex of Rs 1200 crore. The new expansion would start contributing to revenues from FY24.

With global retailers looking to de-risking their supply chains, Vardhman Textiles is expected to be a key beneficiary in the yarn and fabric segment.

At 1.20 pm on Thursday, the stock is trading at Rs 2014.25, down by 1.01% or Rs 20.65 per share on BSE. The 52-week high of the scrip is recorded at Rs 2,198.85 and the 52-week low at Rs 805.25 on the BSE.

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