Arvind Ltd:-Buy/sell

Scripscan:Arvind Ltd



Story:As expected, like FY11, the company ended Q1FY12 on a high note, keeping the growth momentum going as others struggle to sustain. The company attributed the growth in profits to a rise in revenues coupled by improvement in operating margins in both textiles, brands and retail businesses. Its consolidated net profit surged over two-fold to Rs.61.05 crore on a YoY. Net sales rose to Rs 1,180.17 crore v/s to Rs 838.97 crore in Q1FY11. Overall growth was led by growth in domestic market on the back of strong B2C business model which Arvind has created. With fall in cotton prices, the demand for fabrics, which has been sluggish for past few months, is expected to only rise.Raw material cost on YoY rose 31% and employee cost was 14%. Interest cost is pretty high at Rs.84 crore, a rise of 29% on YoY. With current spike ups in interest rates, this cost is expected to rise further in the coming quarter. Arvind is banking big on its realty business in current fiscal. It has already formed a JV for a large township project with Tatas for its 134 acres into a SPV. 50% of the value of land, Rs.125 crore is expected to accrue to the company in current fiscal. For FY12, the company hopes to notch up a turnover of around Rs.4800 crore and if it is able to maintain the same margins, then a net profit of around Rs.195 crore. On an equity of Rs.257.81 crore (includes Rs.3.41 crore from merger with Arvind Products) the FY12 EPS of Rs.7.55 discounts the current price by around 12 times. A good bargain for the largest denim making company in the world.



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