Ashish Kacholia Stocks: This textile scrip may grow by 25% ; ICICI Direct Research lists key triggers

This Ashish Kacholia-backed textile stock, Faze Three, has potential to grow over 25 per cent on the back of strong performance in March quarter earnings during a tough environment, ICICI Direct Research said being bullish on the stock, suggesting to Buy with a target price of Rs 405 per share. 

Ace investor Ashish Kacholia, who is also fondly called as Big Whale on the Indian stock market, holds 1,133,856 equity shares, which translates into a 4.7 per cent stake in Faze Three, as per the latest shareholding pattern of the company available on the exchanges. 

The stock on Wednesday slipped almost 2 per cent to Rs 382 per share on the BSE as compared to 0.56 per cent fall in the S&P BSE Sensex at the market close. 

The company reported the highest ever quarterly sales driven by robust demand, wherein sales grew 43 per cent year-on-year (YoY) to Rs 155.3 crore, and on lower finance costs and tax rate, the profit growth of 83 per cent YoY to Rs 15.8 crore. it operated at full utilisation levels in Q4FY22. 

Over the past five years, the impact of Faze Three’s improved financial performance has been visible in upward momentum in stock price, which has grown at around 27 per cent CAGR (Compound Annual Growth Rate) over the period, ICICI Direct Research said in a note. 

The near-term challenges such as a spike in cotton/polyester yarn prices may persist but the brokerage believes there is enough headroom for sustainable long-term growth, it said. 

Key triggers for future price-performance: 

It is currently operating at peak utilisation levels and has a healthy order book for the next two quarters 

Embarked on brownfield capex and outlined capex of Rs 80 crore across product lines, categories like rugs, bathmats and top of the bed segments  

The aforesaid capex is expected to generate incremental revenue worth around Rs 800-1000 crore and value accretive capital deployment to enhance RoCE to over 25 per cent in the next 3-4 years. 

Visible shift by large retailers of sourcing to India from China across the company’s product categories to create sustained demand.