MOSL: ARVIND (Neutral)-Brands business pull up overall growth
Arvind: Brands business pull up overall growth
(ARVND IN, Mkt Cap USD1.7b, CMP INR412, TP INR402, 2% Downside, Neutral)
- Revenue, EBITDA in-line; PAT above estimates: Arvind’s (ARVND) revenue grew 15.9% YoY to INR27.05b (est. of INR26.7b) in 3QFY18. Brands & Retail business grew by 23.6% YoY to INR9.6b, while Textiles business grew by 9.4% YoY to INR15.3b. EBITDA rose 5% YoY to INR2,484m (est. of INR2,515m), driven by increased profitability in Brands. However, Textiles continued to face pressure from INR appreciation. EBITDA margin contracted 90bp YoY to 9.2% (est. of 9.4%) on account of higher raw material costs (+440bp to 48.7% of net sales), partly offset by a decline of 310bp in other expenses and 50bp in employee expenses. Adjusted PAT stood at INR883m (est. of INR767m) v/s INR752m in 3QFY17. Extraordinary expense stood at INR106m (paid to workers under VRS).
- Demand expected to pick up in 4Q: Textiles witnessed subdued revenue growth as domestic demand remained muted. Additionally, profitability of Textiles was impacted by a reduction in duty drawback/other incentives and a strong INR, leading to a relatively slow festive season. However, demand picked up in November and December, and the trend is expected to continue into 4Q. Growth is also expected to be supported by the Brands business, where the company expects most emerging brands (barring 2-3) to turn EBITDA break-even in 4QFY18. Further, ARVND has started its operations at one of the sites in Ethiopia, where it made marginal profits for the first time in 3QFY18. The company expects Ethiopia to reach high-single-digit margin by FY19.
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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