Tuesday, May 31, 2011

Stock Idea: Arvind Ltd.

As expected, the company ended FY11 on a high note. Despite a 33% rise in raw material costs and 16% rise in interest outgo, the company, on a 25% rise in consolidated net sales, posted a whopping 211% rise in net profit. Call it is the base effect or better realisations, the company has done well. Even sequentially, for Q4FY11, though the growth is not as trailblazing as on the annual basis, topline grew 19% and bottomline by 31%. Interestingly, raw material cost for the quarter was down 7%. This shows that cotton prices are on the decline.

Arvind holds 54% stake in another listed group company, Arvind Products and this company is now to be merged with Arvind. The merger ratio is 1 share of Arvind for every 11 shares of Arvind Products. The company 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 10 times. A good bargain for the largest denim making company in the world.
Source: Internet (Premiuminvestments.in)

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