Textile stocks in focus; Nitin Spinners, Filatex, Lambodhara zoom up to 16%

Lambodhara Textiles hit a 52-week high of Rs 164, surging 16% in the intra-day trade toda. The stock has rallied 30% in the past two trading days

Shares of select textile companies rallied up to 16 per cent on the BSE in Monday's intra-day trade on the back of heavy volumes and on expectations of improved outlook.

Lambodhara Textiles (LTL), Nitin Spinners, and Filatex gained in the range of 9 per cent to 16 per cent. In comparison, the S&P BSE Sensex was up 1 per cent at 60,554 at 02:00 PM.

Among individual stocks, LTL hit a 52-week high of Rs 164 as its shares surged 16 per cent in the intra-day trade today on the back of over five-fold jump in trading volumes. In the past two days, it has zoomed 30 per cent, while it hs skyrocketed 78 per cent on the BSE in the past 11 trading days .

LTL manufactures 100 per cent synthetic yarns such as PSF yarn, VSF yarn and blended yarns like PV yarn and PC yarns in the count range of 30s to 60s. It also manufactures value-added synthetic yarns such as neppy yarn, slub yarn, multi-twist yarn and siro yarn, among others.

On December 7, 2022, rating agency Icra upgraded the ratings of LTL's instruments and revised outlook to 'Stable' from 'Positive'.

"The rating upgrade reflects an improvement in performance of LTL in FY22 in terms of revenues and cash accruals, which are likely to be robust in the current fiscal as well," Icra said in its rating rationale.

The performance, the agency said, is likely to further improve in the current fiscal with an expected revenue growth of approximately 15 per cent on the back of steady demand, with performance supported by favourable revenues in H1 FY23.

"LTL’s revenues are likely to grow steadily over the medium term with the expected availability of capacity additions in the coming fiscal. Favourable yarn realisations have supported LTL’s operating margins to remain healthy at ~15.6 per cent in FY2022 despite decline from the high level of FY2021. The company’s margins are expected to continue at around 15 per cent over the medium term, backed by its focus on value-added yarn," ICRA said.

The 'Stable' outlook reflects Icra’s expectations that LTL would continue to maintain a healthy profitability and working capital position, thereby maintaining comfortable debt protection metrics and liquidity position, it added.

Meanwhile, the stock of Nitin Spinners surged 9 per cent to Rs 224.50 in the intra-day trade today, after ICICI Securities initiated coverage under I-Direct Nano format with a 'Buy' rating on the stock and a target price of Rs 290 per share.

"Consistent improvement in financial performance of Nitin Spinner in spite of cyclical nature of textile industry signifies Nitin Spinner’s ability of optimum asset utilisation leading to sustainable profit growth. In line with its superior fundamental performance, the stock price has grown at 15 per cent CAGR over last five years. We believe that Nitin Spinner, with its presence across textile value chain (yarn to fabric), is well poised to capture the export opportunity in global textile trade," it said.

The company has demonstrated ability to effectively sweat its assets and maintain average asset utilisation of 85 per cent plus, which has led to outperformance in terms of revenue growth over the last decade. The capacity expansion across segments to drive revenue growth. The company’s planned capex of Rs 900 crore can generate incremental revenue of ~ Rs 1,100 crore (peak revenue of Rs 3500 crore). The government initiatives like signing of FTAs with multiple countries, stability in export incentive policy to provide opportunity for Indian exporters across textile value chain to gain market share in global textile trade are key triggers for future price performance, the brokerage firm added.