Share Trading Tips

Vardhman Textiles

BSE ID : 502986

NSE ID : MAHAVIRSPG

CMP: Rs.234.90
Looking at the expected revival in the fortunes of the spinning sector, the company is likely to post an EPS of Rs 36 for FY10 which is likely to move to Rs 44 for FY11.

Vardhman Textiles

Vardhman Textiles is the largest spinning company in the country, with total installed capacity of 6,83,376 spindles as at 31-03-2009 with 900 looms, and 3,408 rotors. The company has been periodically adding spindles and present capacity has moved past 7 lakh spindles.

The company is also into making of fabrics, as also, having 1 lakh tonne steel plant making ingots and billets with rolled product capacity of 80,400 TPA, using inhouse ingots and billets.

The company has in all, total 16 plants, of which, about 10 are spinning units, 1 wearing unit, 1 dyeing unit, 3 fabrics and textiles units and 1 steel plant.

Present equity of the company is placed at Rs 57.77 crores, with reserves of Rs.1,215 crores, as at 31-03-09, resulting in a book value per share at Rs 220. This has been raised to Rs 245, as at 31st December, 09. The total debt of the company is presently at Rs 2,400 crores, which is backed by net current assets of Rs 1,400 crores. Of this, FCCB outstanding are about Rs 250 crores.

For FY09, on consolidated basis, the total income of the company was placed at Rs 2,993 crores with PAT at Rs 171 crores. However this includes profit of Rs 113 crores (net off taxes) on sale of discontinued operations. So, PAT from normal operations were at Rs 78.28 crores, resulting in an EPS of Rs 13.50 and at Rs 29.50 after considering extraordinary income. However, cash EPS was placed at Rs 67, due to higher depreciation of Rs 243 crores and Deferred Tax of Rs 45 crores.

However, fortunes of spinning industry have vastly changed in the current year, with industry experts saying that such time has not been seen by the industry, in last one decade. This cycle is likely to last for at least next one year.

For 9 months ending, on standalone basis, the total income of the company was placed at Rs 2,005 crores with PAT at Rs 138 crores, resulting in an EPS of Rs 23.90 for the period, with cash EPS being placed at Rs 55.

The present equity of the company is placed at Rs 57.77 crores, with face value of Rs 10 each. Promoters stake is at 67% with institutional investors holding at 12% while public holding is at 21%.

Looking at the expected revival in the fortunes of the spinning sector, the company is likely to post an EPS of Rs 36 for FY10 which is likely to move to Rs 44 for FY11.

Share is presently ruling at Rs 228.10 which results in a PE multiple of about 6.50 times on historical earnings and about 5.50 times on forwarding earnings. Share is now available below its book value, which is now at Rs 244 per share.

Share has potential to move to Rs 300 in next 5-6 months, with minimal downside risk. Buying is advised at Rs 228.10.