Monday, March 17, 2014

Arvind - Buy on declines and Add to Portfolio

Company Back Ground

Arvind Limited is an India-based textile company. The Company operates in three segments: Textiles segment, which includes products, such as, fabric, yarn and garments; Brands and Retail segment, includes branded garments and apparels, and Others segment includes electronic private automatic branch exchange (EPABX) Systems (Electronics), construction and project activity.

The Company operates in divisions, such as denim, woven fabrics, knits fabrics, garment exports, advanced materials, Arvind Brands, Mega Mart retail, The Arvind Store, engineering, telecom, and real estate. The Company’s weaving capabilities include Airjet looms and Rapier looms. Its finishing capabilities include continuous bleaching and dying ranges, caustic mercerization, and machinery for various chemical and mechanical finishes.

The brands sold in MegaMart include RUGGERS - SKINN - ELITUS - DONUTS - KARIGARI - MEA CASA - AUBURN HILL - BAY ISLAND - COLT - LEISHA- EDGE.   Arvind has sealed a deal to purchase a 49% interest in Calvin Klein India, the finalized deal will help Arvind strengthen this partnership. The transaction will also help propel Arvind into international growth through deals with overseas brands, the report stated.

Despite the fallout of recession, Arvind`s brands business grew by 25% in the last ninemonth period to Rs 1,412 crore. The company`s profit before tax and interest from brands business grew by 17% to Rs 34.7 crore in the last nine months. The company`s brands include Excalibur, Flying Machine, Colt and Newport. In addition to this, it owns the right to market brands such as Polo, Arrow, Cherokee, Next, Club America and Megamart. The premium end of the apparel market has been growing at a rapid 16-18% as aspirational customers are looking to buy better brands

Market Performance :

The stock has been on an uptrend, and has gained as much as 75% out performing both Sensex, and Nifty returns during the same period. In the last 3 months the stock has moved sharply and had high and low Rs.159 and Rs.124 giving returns in excess of 20%

Investment Strategy :

The company is likely to post robust results for the Q4 of current year making it an attractive buy around Rs.137 to Rs.140.  Depending on investment horizon we could expect decent 20% return in next few months, while long term portfolio should continue to hold to stock for a target price of Rs.200/- and keep adding on declines.

Equity Research Analyst

Smart Investor
Equity Research Division

Ravina Consulting
No.24 Pattamal Plaza
3rd Cross Kamannahalli

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