Buy TT Ltd - Fairwealth Securities ltd

TTL is the flagship company of the 58-year-old TT group, a household name in textiles with its popular TT brand. Earlier known as Tirupati Texknit, it is now a vertically integrated textiles manufacturer, mainly producing cotton, yarn, fabric, garments and accessories.

Key Investment Rationale:

Strengthening Product Portfolio

The Company is diversifying its product mix to garments which are primarily sold in the domestic market. It is expected that its share of garments in revenue will reach to 30% in current fiscal from 16% in FY10.

Captive Power will improve EBIDTA margins

Currently, it has a wind power capacity of 3.75 MW and is planning to add further 40 MW in next three years. This will ensure a steady supply of power in this energy intensive industry.

Foray into Organic Fabrics

The Company is exporting organic yarn to international vendors from last couple of years. Recently they introduced their own range of organic innerwear, which includes organic vests etc. This would enable the company to make its presence in the organic segment.

Company reported net profit of Rs 4.33 cr in Quarter ended June 2010 compared to net profit of Rs 0.25 cr in Quarter ended June 2009. Net sales rose 75.94% to Rs.113.99 cr in Q1 June 2010 over Q1 June 2009.

Currently, at price of Rs 41 the stock is trading at a P/E of 4.5x of its FY11E earnings, and 3.51x of its FY12E earnings.

We recommend a BUY with target price of Rs 55, given that company's future shows potential.

Source : Equity Bulls

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