Vardhman Textiles - CMP: Rs.221; Target Price: Rs.297 - Karvy

Vardhman Textiles (Vardhman) is undergoing capacity expansion for its spinning, weaving and dyeing units with an investment of Rs. 13 bn over FY13-FY14. Its fabric business is likely to maintain its growth momentum. Vardhman is expanding its capacities in yarn and fabric processing, which we believe would help in boosting volume growth. With cotton procured at lower prices, Vardhman's margins are expected to improve, as the yarn prices are stablizing with sustained and fresh demand.

We expect Vardhman to post an EPS of Rs. 39.1 and Rs. 49.9 in FY13E and FY14E, respectively.

We initiate coverage on Vardhman Textiles with "BUY" recommendation with a target price of Rs. 297 per share - valuing 6x multiple for FY14E EPS - representing 34% upside from the CMP.

Source : Equity Bulls

Keywords