Stock of this garments & apparels company zoomed over 100% in 2 months

PGIL maintains a confident outlook on the continued growth and traction of Indian exports in the medium to long term.

Shares of Pearl Global Industries Limited (PGIL) hit a new high of Rs 1,470, surging 12 per cent on the BSE in Tuesday’s intra-day trade. The stock of garments & apparels maker was trading higher for the sixth straight day, soaring 45 per cent during the period on expectations of strong earnings.

In past two months, the stock price of PGIL has more-than-doubled or zoomed 104 per cent. Further, in past three months, it has skyrocketed 150 per cent.

PGIL (including its subsidiaries) manufactures readymade garments, across categories (knits/woven/denim/non-denim/outerwear) and segments (men’s wear, women’s wear as well as children’s wear).

The company (along with its subsidiaries) has its manufacturing base in India (Gurugram, Chennai and Bengaluru), Bangladesh, Vietnam and Indonesia, with a total capacity to manufacture ~80 million pieces of garments per annum. PGIL is an approved vendor of renowned international brands and retailers like GAP, Banana Republic, PVH Corp., Kohl’s, Macy’s, Primark, Target, Next among others.

As on June 30, 2023, the promoters held 66.58 per cent stake in PGIL. Out of the remaining 33.42 per cent holding, retail investors (total holding 23.98 per cent) Sanjiv Dhireshbhai Shah (7.62 per cent) and Mukul Mahavir Agrawal (3.46 per cent) collectively held 11.08 per cent stake in the company, the shareholding pattern data shows. Foreign portfolio investors held 5.01 per cent holding in PGIL, data shows. The company has a total 21.66 million outstanding shares.

PGIL’s management expects order book for the industry will be close to normal going forward. "Order booking looks positive as the retailers prepare for the upcoming seasons. The company’s next few months sales is conservative. This is mainly because the global retailers continued their efforts to reduce their excess inventory. Global retailers witnessed a decline in their excess inventory during Q1 of 2023 and expect the inventory position to further reduce significantly by current year of 2023", the management said in the Q1FY24 earnings conference call on August 14.

With the backdrop of China plus one strategy, it is increasing its market share along with other competing nations. There is a high likelihood of India signing a free trade agreement with Europe and the UK, while already benefiting from the India-Australia FTA.

The company maintains a confident outlook on the continued growth and traction of Indian exports in the medium to long term. The Indian government is actively working to promote the growth and development of the country's textile sector, implementing a range of effective and meaningful schemes over the years, the management said.

Meanwhile, ICRA expects PGIL to sustain a comfortable growth, led by its operational strengths, which provide it with a competitive edge, including long-term relationships with renowned international retailers, which have been facilitating repeat business.

The impact of demand slowdown has also been partially offset for Indian exporters because of business re-route from China, amid concerns China’s major cotton variety procured in Xinjian region (which is under human rights violation), and the China-plus- one policy proposed to be followed by the large buyers.

It is pertinent to note that PGIL’s geographically diversified manufacturing base across leading apparel-exporting regions of India, Bangladesh, Vietnam and Indonesia place it more favourably than its peers to benefit from the said potential shift, besides its large scale of operations and an established track record, the rating agency said in rationale.

Further, adoption of an asset-light model for expansion, going forward, is expected to reduce reliance on debt and keep PGIL’s financial profile comfortable with healthy return metrics, a conservative capital structure and adequate coverage metrics, it added.