Market Guru Anil Singhvi picks Arvind Ltd as his SIP Stock of the day - Know the reason WHY

Zee Business Managing Editor and renowned Market Guru Anil Singhvi has said that slowly and steadily the outlook on the textile sector is changing. He said that capacity in the textile sector instead of increasing YoY has reduced by 5% to 10%. Recovery in Europe and US markets, indicate strong demand which will benefit the Indian companies like Arvind Ltd. Focus should be on companies where debt will be reduced.

Singhvi said Investors were concerned about the huge debt levels for metal companies like Tata Steel and SAIL. However, these companies have reduced their debt levels substantially and their share prices have risen sharply due to commodity cycle up move. Balance sheet has become stronger for these companies and the same will happen with Arvind Ltd, says Singhvi.

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Singhvi said that Arvind Ltd will not only benefit from rising Textile prices but also from reduction in debt levels. The sales of the company is Rs 6500 cr and the market cap is Rs 1900 cr to 2000 cr. Company has reduced debt from as high as 3590 cr as on 31 March 2018 to around 2354 cr as on 30 September 2020 that is reduced debt by Almost 34% and in Q4 company has planned to further reduce the debt by 100 cr. Singhvi said that the debt will reduce by Rs 500 cr to Rs 700 cr every year. In FY22, debt will come down to Rs 2000 cr and In FY23 debt will come down to Rs 1500 cr. Balance will improve and become stronger.

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वरिंदर बंसल के रडार पर आया DCM Shriram जिसमें बनेंगे कमाई के मौके@AnilSinghvi_ @varinder_bansal pic.twitter.com/l8Vl4HFSNa

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Singhvi said that valuations are attractive currently due to the debt on the books of the company. The balance sheet is weak and hence the valuations are attractive at current market price. The cash EPS of the company will be Rs 20 indicating that company is available at PE of 4. At EPS of Rs 8 to Rs 9, the company is available at PE of 8 to 10. The short term target on the share price is Rs 95 – Rs 100 while from investment point of view, the target price could be Rs 115 – Rs 125.

Market Expert Jay Thakkar said that there is an Inverse head and shoulder pattern breakout on this stock last week. The stock should hold Rs 70 on closing basis and see a target of Rs 83 and Rs 95 from here on.

Market analyst Vishvesh Chauhan said that as far as stock is holding Rs 60 levels it can see a target of Rs 100 from here on.

Ashish Chaturvedi, Research Analysts at Zee Business said that the company has a Long history which date back to as early as 1931 and currently the largest textile company in India with Revenue over USD  1bn with managing 15 global apparel brands of the likes of Tommy Hilfiger, US Polo,CK,GAP etc.  He said that Company was very cheap with a PB of just 0.7 and Mcap/Sales of 0.38. In the last 2 quarters Promoter's and FII's both have increased their stake in the company. 

Ashish said that with no major capex expected at Average life of Machinery is as high as 12 years, only maintenance capex will be necessary and thus FCF will be healthy which will help in reducing debt considerably. He said that Company derives almost 40-50% of its total revenue from exports and the global market has been recovering also due to pandemic many small players have exited which resulted in a vacuum for big players whose long term benefit are assumed to be very high for Big players like Arvind Ltd.

Ashish said that During FY20,the company completed the implementation of garmenting expansion (Banglore ,Ranchi & Ahmedabad) and whose full benefit will come into play after normalcy starts kicking in. The company has inventory of Rs 1054 cr which will also help in improving margins of the company. Inventory is 55% of its Market cap of the company. FII and DII have increased their stake in the comp[any in the last 2 quarters