Analyst Corner: Buy Arvind on strong growth in brands & retail business

Published: November 14, 2014 12:42 AM

Maintain buy on Arvind with a target price of R360, implying 10x FY16e EV/ebitda...

Maintain buy on Arvind with a target price of R360, implying 10x FY16e EV/ebitda. We expect revenue and PAT to post 15.2% and 13.7% CAGR, respectively, over FY14-17e along with significant improvement in business mix in favor of brands and retail. We cut ebitda estimates by 12% and 15% and EPS estimates by 12% and 19% for FY15e and FY16e respectively to reflect lower growth and margin for textile business.

Arvind’s revenue grew by 14.3% to R1970 crore, while ebitda grew by 4% to R242 crore, with ebitda margins at 12.3%.

Arvind reported a strong growth in the brands and retail business, with revenue posting 28.6% growth, standing at R650 crore, against R5 00 crore in Q2FY14. Growth was driven by 123 store additions y-o-y, (20 new store openings during the quarter) thus taking the total to 761 stores along with 16% growth in space to 0.77 million sqft; sales through third party online websites grew 4x y-o-y, and now contribute 5% to brands sales.

Like-to-like (LTL) growth during the quarter was subdued at 4.3%. In MegaMart (MM), continuing with the restructuring exercise, on a y-o-y basis, management closed down 40 stores (12 during the quarter), taking the store count down to 146. However, new large format store openings ensured that overall retail space under MM on a y-o-y basis grew 13% to 0.81 million sqft.

By Motilal Oswal

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition