Arvind: Branded apparel drives Q4 show, but demerger to shift focus back to textiles

Arvind’s consolidated numbers for the quarter and fiscal year ended March 2018 were quite decent and the company saw its branded apparel business improving further over the period.

But now that it has declared its earnings, the company’s proposed demerger, which would involve listing the engineering and branded apparel businesses separately, should bring the focus back to its textiles business.

Arvind’s textiles business has been steadily evolving into a less capital-intensive and higher-ROCE (return on capital employed) garment division, with a reduced focus on commodity denim. Advanced materials (technical textile) is a business with high entry barriers and high margins, and is likely to be the next driver of growth for the company. While the stock has had a good run so far, its future looks promising too. So any weakness in the scrip should be used to accumulate it.

In the quarter gone by, the company’s overall sales grew on the back of improved offtake in all its segments. However, prima facie, a rise in cotton prices impacted the textile segment’s margins.

Arvind’s branded apparel segment, besides being on a consistent uptrend in recent times, is still well-poised to deliver healthy returns. As a result, the company is aggressively scaling up operations and marketing expenses in this space, aiming to maximise operating leverage. The engineering segment too has put on a steady show.

Arvind’s consolidated numbers for the quarter and fiscal year ended March 2018 were quite decent and the company saw its branded apparel business improving further over the period.

But now that it has declared its earnings, the company’s proposed demerger, which would involve listing the engineering and branded apparel businesses separately, should bring the focus back to its textiles business.

Arvind’s textiles business has been steadily evolving into a less capital-intensive and higher-ROCE (return on capital employed) garment division, with a reduced focus on commodity denim. Advanced materials (technical textile) is a business with high entry barriers and high margins, and is likely to be the next driver of growth for the company. While the stock has had a good run so far, its future looks promising too. So any weakness in the scrip should be used to accumulate it.

In the quarter gone by, the company’s overall sales grew on the back of improved offtake in all its segments. However, prima facie, a rise in cotton prices impacted the textile segment’s margins.

Arvind’s branded apparel segment, besides being on a consistent uptrend in recent times, is still well-poised to deliver healthy returns. As a result, the company is aggressively scaling up operations and marketing expenses in this space, aiming to maximise operating leverage. The engineering segment too has put on a steady show.

[“source-ndtv”]

Author: Roky