With strong revenue growth of 17% CAGR over FY2010-2013 and overall EBIDTA margin expansion of 170 bps to 14.2%, we expect earnings to grow at a CAGR of 74.3% over the same period and ROCE to expand to 15.7% from the present 7.4%.
Arvind Limited
We initiate coverage on Arvind as a BUY with a Price Objective of Rs 81 over a period of 15-18 months. At CMP of Rs 44.1, the stock is trading at 9.2x and 5.6x its estimated earnings for FY2011E & FY2012E representing a potential upside of ~83.7%. Arvind is one of the largest fabric producers in India with 200 million metres of fabric producing capacity. With ~100 mn metres fabric capacity expansion getting operational in phases over FY2010-FY2013 and robust growth in Brands & Retail business, the earnings are expected to grow at CAGR of 74.3% during FY11-13. Monetization of its 500 acres land bank is expected to result cash flows of nearly Rs 1000 crore over a four year period which would be used to fund the capex and retire part of the debt.
Valuation
With strong revenue growth of 17% CAGR over FY2010-2013 and overall EBIDTA margin expansion of 170 bps to 14.2%, we expect earnings to grow at a CAGR of 74.3% over the same period and ROCE to expand to 15.7% from the present 7.4%. We value the stock at Rs 81 (using the DCF method) representing a potential upside of ~83.7% from the CMP of Rs 44.1.
Arvind Limited
We initiate coverage on Arvind as a BUY with a Price Objective of Rs 81 over a period of 15-18 months. At CMP of Rs 44.1, the stock is trading at 9.2x and 5.6x its estimated earnings for FY2011E & FY2012E representing a potential upside of ~83.7%. Arvind is one of the largest fabric producers in India with 200 million metres of fabric producing capacity. With ~100 mn metres fabric capacity expansion getting operational in phases over FY2010-FY2013 and robust growth in Brands & Retail business, the earnings are expected to grow at CAGR of 74.3% during FY11-13. Monetization of its 500 acres land bank is expected to result cash flows of nearly Rs 1000 crore over a four year period which would be used to fund the capex and retire part of the debt.
Valuation
With strong revenue growth of 17% CAGR over FY2010-2013 and overall EBIDTA margin expansion of 170 bps to 14.2%, we expect earnings to grow at a CAGR of 74.3% over the same period and ROCE to expand to 15.7% from the present 7.4%. We value the stock at Rs 81 (using the DCF method) representing a potential upside of ~83.7% from the CMP of Rs 44.1.
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