Antique | Arvind 2QFY24 result update – 231101

Antique | Arvind 2QFY24 result update – 231101

Arvind 2QFY24 result update – 231101 (Please click here to view the report)

Decent quarter; AMD continues to shine

ARVIND’s (ARVND) 2QFY24 highlights are the textile volume (across all segments) improving sequentially amidst a challenging export business environment and AMD continuing to see robust growth with margin expansion. Textile volumes held steady across all segments of its textiles business maintained by expanding its customer base across geographies, likely to pick up in the next few quarters. Textile revenue was at INR 14.6 bn (2.6%/ -17% QoQ/ YoY). Textile revenue was lower YoY on account of price deflation. Price realization of textile products remained soft, owing to soft cotton prices (~INR 61,000/candy). On the other hand, AMD segment continues to impress with its sustained and robust growth, recording a revenue of INR 3.54 bn (3.5%/ 13.1% QoQ/ YoY), which contributed 18% of the operating revenue during the quarter (compared to 14% in 2QFY23); additionally, AMD margin expanded to 15.7% (20 bps/ 340 bps QoQ/ YoY). Management expects the AMD segment to continue on its growth path and grow at 20%–25% CAGR going forward. In the textile segment, denim and garment segment volumes have started to recover, while woven continues to operate at high capacity utilization. Management expects performance in 2H to be stronger than 1H. We maintain BUY with a revised target price of INR 249 (previously INR 145).

Investment Summary

We believe the worst is behind for the textile segment and expect volume to see revival in 2HFY24. The outlook on AMD and garment segments continues to be optimistic. With AMD becoming a significant chunk of the business and it continuing to show growth >20% CAGR and margin of >15%, we value the AMD business separately at a higher EV/EBITDA multiple of 10x 1HFY26E, while valuing the textile segment at 5.0x EV/EBITDA of 1HFY26E, translating to a blended P/E multiple of 10.43x of 1HFY26E. We maintain BUY with a revised target price of INR 249 (previously INR 145).