MOSL: ARVIND (Neutral)-Weak consumer demand impacts growth-NCLT approves demerger
Arvind: Weak consumer demand impacts growth; NCLT approves demerger
(ARVND IN, Mkt Cap USD1.2b, CMP INR346, TP INR397, 15% Upside, Neutral)
- Revenue up 12% YoY, EBITDA margin expands 100bp YoY: Revenue increased 12% YoY to INR30.5b (our estimate: INR29.5b) in 2QFY19. Branded Apparels business grew by 9% YoY to INR12.3b (unadjusted: +13% YoY to INR11.6b; stated higher due to Ind-AS adjustment) and Textiles business by 6% YoY to INR14.9b. EBITDA rose 27% YoY to INR2.8b (our estimate: INR2.6b), driven by increased profitability in Brands, with the margin expanding 100bp YoY to 9.1% (our estimate: 8.8%). PAT before exceptional item grew 30% YoY to INR0.9b (our estimate: INR0.8b). For 1HFY19, revenue grew 11% YoY to INR59b, EBITDA rose 22% YoY, and PAT before exceptional item increased 21% YoY.
- Brands and Garments disappoint due to weak demand: Branded Apparels – a key focus segment – grew at a moderate rate of 13% YoY in 2QFY19 due to weak consumer sentiment and a high base (Diwali festival was in 2QFY18). LTL growth continued deteriorating (from touching double-digits in July to coming in negative in September 2018). Power Brands revenue grew 13% YoY, but the margin shrank 30bp YoY due to higher ad spends. Textiles remained under pressure due to oversupply in Denims (+3% YoY); Garments growth, too, came in lower than expected at 15% YoY due to lower orders from Brands.
Arvind Mills is primarily engaged in manufacturing and marketing of textiles, mainly denim, khakis, shirting, knits, shirts, jeans, trousers and knitting garments, in India.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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