CMP 283.45
Target Price 325.00
ISIN: INE034A01011
NOVEMBER 7th 2015
12th h, 2013
ARVIND LIMITED
Result Update (CONSOLIDATED BASIS): Q2 FY16
BUY
Index Details
Stock Data
Sector Textiles
BSE Code 500101
Face Value 10.00
52wk. High / Low (Rs.) 327.50/216.20
Volume (2wk. Avg. Q.) 185000
Market Cap (Rs. in mn.) 73198.13
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 78514.00 86679.46 94480.61
EBITDA 11060.50 12132.10 13104.97
Net Profit 3411.00 3618.98 3911.00
EPS 13.21 14.01 15.14
P/E 21.46 20.23 18.72
Shareholding Pattern (%)
(QUARTERLY) As on Sep-15 As on Jun-15
PROMOTER 43.78 43.78
FIIs 15.23 14.69
DIIs 16.13 15.79
OTHERS 24.86 25.74
1 Year Comparative Graph
ARVIND LIMITED BSE SENSEX
SYNOPSIS
Arvind Ltd, one of the largest integrated textile and
branded apparel players, with the presence of
almost eight decades in this industry. It is among
the largest denim manufacturers in the world.
The company has achieved net sales of Rs. 20964.30
million, rose by 6.71% y-o-y in Q2 FY16 as against
Rs. 19646.30 million in Q2 FY15.
For Q2 FY16, Earnings before Interest, Tax, Dep
stood at Rs. 2933.30 million, rose by 7.69% y-o-y
compared to Rs. 2723.80 million for Q2 FY15.
Net profit stood at Rs. 910.30 million for the 2nd
quarter of the financial year 2016 as against Rs.
932.60 million in the corresponding quarter of the
previous.
Arvind Ltd has entered into the beauty and
cosmetics segment through a Partnership with
world's leading beauty retailer SEPHORA.
The revenue from Brands & Retail business rose by
9% of Rs. 7028.60 million in Q2 FY16 as compared
to Rs. 6442.40 million in Q2 FY15.
In Q2 FY16, Textile segment registered a growth of
5% i.e., Rs. 12958.50 million as compared to Rs.
12315.00 million in Q2 FY15.
For the end of H1 FY16, Net sales grew by 6.32% at
Rs. 39733.60 million compared to Rs. 37371.80
million for the end of H1 FY15.
Net Sales and PAT of the company are expected to
grow at a CAGR of 16% and 12% over 2014 to
2017E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Arvind Ltd 283.45 73198.13 13.21 21.46 2.98 25.50
Vardhman Textiles Ltd 724.00 46084.00 62.98 11.50 1.49 100.00
Orbit Exports Ltd 390.00 5576.70 20.26 19.25 5.96 45.00
Raymond Ltd 410.85 25218.30 15.58 26.37 2.16 30.00
QUARTERLY HIGHLIGHTS (CONSOLIDATED BASIS)
Results updates- Q2 FY16,
Arvind Ltd, one of the largest integrated textile and branded apparel players, with the presence of almost eight
decades in this industry. The company reported its financial results for the quarter ended 30th September, 2015.
The company has achieved net sales of Rs. 20964.30 million in Q2 FY16 as against Rs. 19646.30 million in the
corresponding quarter of the previous year. Net profit of the company stood at Rs. 910.30 million for the 2nd
quarter of the financial year 2016 against Rs. 932.60 million in the corresponding quarter of the previous year.
The company has reported an EBITDA of Rs. 2933.30 million, rose by 7.69% y-o-y in Q2 FY16. The company has
reported an EPS of Rs. 3.53 for the current Sept quarter as against an EPS of Rs. 3.61 in the corresponding
quarter of the previous year.
Break up of Expenditure:
Rs. In Million Q2 FY16 Q2 FY15 % Chng
Cost of materials Consumed 5706.10 6236.30 -9%
Purchase of Stock in trade 4447.50 529.90 739%
Project Expenses 83.80 199.80 -58%
Employees Benefit Exp 2306.90 2030.90 14%
Dep & Amortization Exp 613.70 515.80 19%
Power & Fuel 1292.00 1301.30 -1%
Stores Consumption 1222.00 1125.90 9%
Other Expenses 4357.90 3826.60 14%
Rs. In Million Sep-15 Sep-14 % Chg
Net Sales 20964.30 19646.30 6.71
PAT 910.30 932.60 (2.39)
EPS 3.53 3.61 (2.42)
EBITDA 2933.30 2723.80 7.69
Segment Revenue
COMPANY PROFILE
Arvind Limited started in the year 1931 with the aim of manufacturing the high-end superfine fabrics. Company
invested in very sophisticated technology with 52,560 ring spindles, 2552 doubling spindles and 1122 looms. It
was one of the few companies in those days to start along with spinning and weaving facilities in addition to full-
fledged facilities for dyeing, bleaching, finishing and mercerizing. The company enjoys a global leadership
positions in textiles as well as Carries an unmatched domestic portfolio of apparel brands and retail formats.
Arvind Ltd., a Lalbhai Group company is one of the largest apparel brand and retail companies and a pioneer of
denim in India. It has the largest portfolio of foreign licensed apparel brands like Arrow, US Polo, GANT, Nautica,
Izod and Tommy Hilfiger. The company owns & operates India’s largest 225-outlet strong value retail chain
under the brand name ‘Megamart’. It is setting-up exclusive stores across the country - ‘The Arvind Store’ that
brings the best of fabric and ready-mades to its customers. It also manufactures a range of cotton shirting, denim,
knits and bottom weights (Khakis) fabrics and Jeans and Shirts Garments. Arvind, through its subsidiary
company Arvind Lifestyle Brands Limited, is marketing in India the branded apparel under various brands and is
also licensee in India for various international brands.
Apart from this, company is present in Denim, Woven’s and Voiles Fabrics, Technical Textiles, Real Estate and
Organic Cotton Production through cotton farming. The company has forayed into real estate to realize the cash
flow of large land bank either through sale or development in form of joint venture or on its own. It entered
technical textile segment to cater to large demand in the industrial sectors Like Personal Protection, Industrial
Filtration, Wind Energy, Defence, Auto Components, Transportation, and Housing & Infrastructure.
Arvind Ltd has decided to demerge it's real-estate business and transfer it to the company's wholly owned
subsidiary Arvind Infrastructure Ltd (AIL). Arvind also plans to list AIL on the stock exchanges. The demerger
will allow Arvind to deploy its resources fully in its core activities and allow AIL to raise further capital and debt
as required for its growth.
Business Division
Denim
Wovens
Garments
Voiles
Knits
Arvind Brands
Mega Mart Retail
Arvind store
Engineering
Real Estate
Telecom
Other
Subsidiary Companies
Asman Investment Limited
The Anup Engineering Limited
Arvind Lifestyle Brands Limited
Arvind Accel Limited
Syntel Telecom Limited
Arvind Infrastructure Limited
Arvind Brands and Retail Limited
Arvind Envisol Private Limited
Arvind Worldwide Inc., USA
Arvind Worldwide (M) Inc.,
Arvind Overseas (M) Limited,
Arvind Spinning Limited,
Arvind Textile Mills Limited,
Arvind Spinning Park Private Limited
Arvind Processing Park Private Limited
Arvind Hebbal Homes Private Limited
FINANCIAL HIGHLIGHT (CONSOLIDATED BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March 31, 2014 -2017E FY-14A FY-15A FY-16E FY-17E
I. EQUITY AND LIABILITIES:
A. Shareholders’ Funds:
a) Share Capital 2581.70 2582.40 2582.40 2582.40
b) Reserves and Surplus 23248.10 24656.40 25889.22 26924.79
Sub-Total Net worth 25829.80 27238.80 28471.62 29507.19
B. Minority Interest 242.40 347.60 476.21 571.45
C. Non-Current Liabilities:
a) Long-term borrowings 13454.60 13940.90 14296.39 14582.32
b) Deferred Tax Liabilities 434.90 470.80 519.76 561.34
c) Other Long term Liabilities 252.40 327.80 394.67 457.82
d) Long Term Provisions 230.70 207.60 240.82 269.71
Sub-Total Long term liabilities 14372.60 14947.10 15451.64 15871.20
D. Current Liabilities:
a) Short-term borrowings 14487.70 17005.80 20066.84 22675.53
b) Trade Payables 12494.70 13493.90 14843.29 15837.79
c) Other Current Liabilities 5357.50 5641.10 5810.33 5943.97
d) Short Term Provisions 847.60 1082.20 952.34 876.15
Sub-Total Current Liabilities 33187.50 37223.00 41672.80 45333.44
TOTAL EQUITY AND LIABILITIES (A + B + C+D) 73632.30 79756.50 86072.28 91283.28
II. ASSETS:
E. Non-Current Assets:
Fixed Assets
i. Tangible assets 27708.00 30008.60 32109.20 33714.66
ii. Intangible assets 1218.80 2073.70 2446.97 2752.84
iii. Capital Work in Progress 1316.30 955.70 707.22 565.77
iv. Intangible assets under 30.40 44.40 50.17 55.19
a) Sub Total- Fixed Assets 30273.50 33082.40 35313.56 37088.46
b) Non Current Investments 1280.50 571.30 599.87 617.87
c) Long Term Loans and Advances 5599.60 6104.10 6323.85 6513.56
d) Other Non current Assets 53.80 84.90 118.35 147.94
Sub-Total Non Current Assets 37207.40 39842.70 42355.63 44367.83
F. Current Assets:
a) Current Investment 12.80 14.20 16.05 17.49
b) Inventories 16281.40 18450.30 19021.51 19880.64
c) Trade Receivables 10093.10 11658.10 13103.70 14361.66
d) Cash and Bank Balances 1663.30 833.20 941.52 988.59
e) Short Term Loans and Advances 5025.00 6343.60 7548.88 8273.58
f) Other Current Assets 3349.30 2614.40 3084.99 3393.49
Sub-Total Current Assets 36424.90 39913.80 43716.65 46915.45
TOTAL ASSETS (E+F) 73632.30 79756.50 86072.28 91283.28
Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 68621.20 78514.00 86679.46 94480.61
Other Income 694.00 932.00 1071.80 1200.42
Total Income 69315.20 79446.00 87751.26 95681.02
Expenditure -59281.20 -68385.50 -75619.16 -82576.05
Operating Profit 10034.00 11060.50 12132.10 13104.97
Interest -3544.70 -3946.00 -4103.84 -4333.66
Gross profit 6489.30 7114.50 8028.26 8771.32
Depreciation -2252.10 -2123.50 -2463.26 -2709.59
Exceptional items -164.00 -543.30 -603.06 -641.66
Profit Before Tax 4073.20 4447.70 4961.94 5420.07
Tax -547.70 -1071.50 -1364.53 -1533.88
Profit After Tax 3525.50 3376.20 3597.40 3886.19
Minority Interest 13.40 34.80 21.58 24.81
Net Profit 3538.90 3411.00 3618.98 3911.00
Equity capital 2581.70 2582.40 2582.40 2582.40
Reserves 20502.50 21968.60 24648.77 27113.65
Face value 10.00 10.00 10.00 10.00
EPS 13.71 13.21 14.01 15.14
Quarterly Profit & Loss Statement for the period of 31st Mar, 2015 to 31st Dec, 2015E
Value(Rs.in.mn) 31-Mar-15 30-Jun-15 30-Sep-15 31-Dec-15E
Description 3m 3m 3m 3m
Net sales 20405.10 18769.30 20964.30 22117.34
Other income 229.70 248.00 319.70 223.79
Total Income 20634.80 19017.30 21284.00 22341.13
Expenditure -17809.60 -16503.60 -18350.70 -19065.14
Operating profit 2825.20 2513.70 2933.30 3275.98
Interest -955.60 -1025.00 -946.70 -971.31
Gross profit 1869.60 1488.70 1986.60 2304.67
Depreciation -560.00 -627.80 -613.70 -617.38
Exceptional Items -484.40 -28.70 -37.70 -42.22
Profit Before Tax 825.20 832.20 1335.20 1645.06
Tax -355.60 -267.80 -405.60 -526.42
Profit After Tax 469.60 564.40 929.60 1118.64
Minority Interest 12.70 16.00 -19.30 -10.04
Net Profit 482.30 580.40 910.30 1108.61
Equity capital 2582.40 2582.40 2582.40 2582.40
Face value 10.00 10.00 10.00 10.00
EPS 1.87 2.25 3.53 4.29
Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 13.71 13.21 14.01 15.14
EBITDA Margin (%) 14.62 14.09 14.00 13.87
PBT Margin (%) 5.94 5.66 5.72 5.74
PAT Margin (%) 5.14 4.30 4.15 4.11
P/E Ratio (x) 20.68 21.46 20.23 18.72
ROE (%) 15.27 13.75 13.21 13.09
ROCE (%) 24.08 23.76 23.70 23.62
Debt Equity Ratio 1.21 1.26 1.26 1.25
EV/EBITDA (x) 9.91 9.34 8.79 8.35
Book Value (Rs.) 89.41 95.07 105.45 114.99
P/BV 3.17 2.98 2.69 2.46
Charts
OUTLOOK AND CONCLUSION
At the current market price of Rs. 283.45, the stock P/E ratio is at 20.23 x FY16E and 18.72 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.14.01 and
Rs.15.14 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 16% and 12% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 8.79 x for FY16E and 8.35 x for FY17E.
Price to Book Value of the stock is expected to be at 2.69 x and 2.46 x respectively for FY16E and FY17E.
We recommend ‘BUY’ in this particular scrip with a target price of Rs.325.00 for Medium to Long term
investment.
INDUSTRY OVERVIEW
India’s textiles sector is one of the oldest industries in Indian economy dating back several centuries. Even today,
textiles sector is one of the largest contributors to India’s exports with approximately 11 per cent of total
exports. The textiles industry is also labour intensive and is one of the largest employers. The industry realised
export earnings worth US$ 41.4 billion in 2014-15, a growth of 5.4 per cent, as per The Cotton Textiles Export
Promotion Council (Texprocil). The textile industry has two broad segments. First, the unorganised sector
consists of handloom, handicrafts and sericulture, which are operated on a small scale and through traditional
tools and methods. The second is the organised sector consisting of spinning, apparel and garments segment
which apply modern machinery and techniques such as economies of scale.
The Indian textiles industry is extremely varied, with the hand-spun and handwoven textiles sectors at one end
of the spectrum, while the capital intensive sophisticated mills sector at the other end of the spectrum. The
decentralised power looms/ hosiery and knitting sector form the largest component of the textiles sector. The
close linkage of the textile industry to agriculture (for raw materials such as cotton) and the ancient culture and
traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the
industries of other countries. The Indian textile industry has the capacity to produce a wide variety of products
suitable to different market segments, both within India and across the world.
Market Size
The Indian textiles industry, currently estimated at around US$ 108 billion, is expected to reach US$ 223 billion
by 2021. The industry is the second largest employer after agriculture, providing employment to over 45 million
people directly and 60 million people indirectly. The Indian Textile Industry contributes approximately 5 per
cent to India’s gross domestic product (GDP), and 14 per cent to overall Index of Industrial Production (IIP).
The Indian textile industry has the potential to reach US$ 500 billion in size according to a study by Wazir
Advisors and PCI Xylenes & Polyester. The growth implies domestic sales to rise to US$ 315 billion from
currently US$ 68 billion. At the same time, exports are implied to increase to US$ 185 billion from approximately
US$ 41 billion currently.
Investments
The textiles sector has witnessed a spurt in investment during the last five years. The industry (including dyed
and printed) attracted foreign direct investment (FDI) worth US$ 1,522.51 million during April 2000 to
December 2014.
Some of the major investments in the Indian textiles industry are as follows:
Reliance Industries Ltd (RIL) plans to enter into a joint venture (JV) with China-based Shandong Ruyi Science
and Technology Group Co. The JV will leverage RIL's existing textile business and distribution network in
India and Ruyi's state-of-the-art technology and its global reach.
Giving Indian sarees a ‘green’ touch, Dupont has joined hands with RIL and Vipul Sarees for use of its
renewable fibre product Sorona to make an ‘environment-friendly’ version of this ethnic ladieswear.
Snapdeal has partnered with India Post to jointly work on bringing thousands of weavers and artisans from
Varanasi through its website. “This is an endeavour by Snapdeal and India Post to empower local artisans,
small and medium entrepreneurs to sustain their livelihood by providing a platform to popularise their
indigenous products,” reported by CEO and Co-Founder, Snapdeal.
Welspun India Ltd (WIL), part of the Welspun Group has unveiled its new spinning facility at Anjar, Gujarat -
the largest under one roof in India. The expansion project reflects the ethos of the Government of Gujarat’s
recent ‘Farm-Factory-Fabric-Fashion-Foreign’ Textile Policy, which is aimed at strengthening the entire
textile value-chain.
American casual fashion retailer Aéropostale, Inc. has inked a licensing agreement with Arvind Lifestyle
Brands Ltd to open standalone stores in the country. Aéropostale will open 30 stores and 25 shop-in-shop
locations over the next three years.
Government Initiatives
The Indian government has come up with a number of export promotion policies for the textiles sector. It has
also allowed 100 per cent FDI in the Indian textiles sector under the automatic route.
Some of initiatives taken by the government to further promote the industry are as under:
The Ministry of Textiles launched Technology Mission on Technical Textiles (TMTT) with two mini-missions
for a period of five years (from 2010-11 to 2011-12 in the 11th five year plan and 2012-13 to 2014-15 in
12th five year plan) with a total fund outlay of Rs 2000.00 mn (US$ 30.1 million). The objective of TMTT is to
promote technical textiles by helping to develop world class testing facilities at eight Centres of Excellence
across India, promoting indigenous development of prototypes, providing support for domestic and export
market development and encouraging contract research.
The Government of India is expected to soon announce a new National Textiles Policy. The new policy aims at
creating 35 million new jobs by way of increased investments by foreign companies, as per Textiles
Secretary.
Road Ahead
The future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well
as export demand. With consumerism and disposable income on the rise, the retail sector has experienced a
rapid growth in the past decade with the entry of several international players like Marks & Spencer, Guess and
Next into the Indian market. The organised apparel segment is expected to grow at a compound annual growth
rate (CAGR) of more than 13 per cent over a 10-year period.
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purchase or sale of any financial instrument or as an official confirmation of any transaction. The information
contained herein is from publicly available data or other sources believed to be reliable but we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be
in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.
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