Textile stocks rally up to 9%; Welspun, Indo Count hit fresh 52-week highs

Shares of textiles companies were in demand and rallied up to 9 per cent on the BSE in Monday’s intra-day trade on expectations of earnings improvement.

Welspun Living, Indo Count Industries and Himatsingka Seide surged between 6 per cent to 9 per cent. In comparison, the S&P BSE Sensex was up 0.45 per cent at 64,067 at 02:45 PM.

The textile industry is expected to experience moderate revenue growth in 2023-2024 (FY24), with domestic demand growing steadily.

The industry remains upbeat about export in FY24. Despite a slowdown in demand for various sectors, including textiles, Indian exporters are optimistic about a strong performance in 2023-24.

Among the individual stocks, Welspun Living hit a fresh 52-week high of Rs 158.05, surging 8 per cent on the BSE on the back of an over three-fold jump in average daily trading volumes today.

In the past four days, the stock has zoomed 24 per cent after the company reported a robust profit after tax (PAT) of Rs 196.7 crore in September quarter (Q2FY24).

The company had posted PAT of Rs 8.7 crore in a year ago quarter (Q2FY23). The stock had hit a record high of Rs 170.70 on October 12, 2021.

Welspun Living, a part of $3 bn Welspun Group, is a global leader in the Home Textiles landscape.

With a strong global distribution network and worldclass vertically-integrated manufacturing facilities located in India, Welspun is strategic partners with top global retailers.

The company has recorded its highest ever quarterly revenues in Q2FY24 at Rs 2,542 crore growing 19 per cent YoY. Export revenues for Welspun saw a growth of 22 per cent YoY, with its innovation products driving the sales with a growth of 67 per cent YoY.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improved 829 bps to 15.4 per cent from 7.1 per cent in Q2FY23.

The management said the company saw increased order flows from the US due to festive demand, aided by a relatively larger market share of its home textile in US.

Shares of Indo Count Industries (ICIL) hit a nearly two-year high at Rs 284.75, soaring 7.5 in intra-day trade on the back of heavy volumes.

The stock price of the largest global Home Textile bed linen manufacturer rallied 25 per cent in the past three days. It had hit a record high of Rs 315 on October 11, 2021.

ICIL is an integrated bedding solution provider, boasting capacity of 153 million metre per annum of dyeing/processing and cutting /sewing.

ICIL exports to nearly 54 countries with the US being the prime market (around 75 per cent of revenues and commanding 20 per cent plus market share in bed sheet).

ICIL is optimistic about its prospects in the coming year, due to its strong order book position.

ICIL said, growth in home textiles in India seems quite positive in coming years, driven by healthy export demand with benefits from reciprocal FTAs (free trade agreements).

Increased hygiene consciousness, rising consumer spending on home renovation, expansion in the real estate market, and fashion sensitivity towards domestic furniture will also contribute to the industry’s steady rise.

Government initiatives like signing of the FTAs with multiple countries and stability in export incentive policy to provide robust opportunities for Indian exporters. ICIL through its sizeable capacity is well poised to capture the export opportunity in global home textile trade, according to analysts.

Meanwhile, shares of Himatsingka Seide (HSL) surged 9 per cent to Rs 155.80 on the BSE. They have rallied 15 per cent in the past two trading days. The stock was quoting close to its 52-week high level of Rs 161.95 touched on September 8.

HSL is a vertically-integrated global textile major that designs, develops, manufactures, and distributes a suite of textile products. It has a diversified portfolio spanning across made-up bedding products, drapery and upholstery fabrics, and towels.

According to CARE Ratings, the destocking at the retailers-end in the US and key export markets amid the recessionary trend in Europe and the cut-down on non-essential expenses in the US due to the high inflation has impacted the demand.

With the destocking at the retailers-end coming round, the home textile industry witnessed an increase in order flows from the US during H1-FY24.

The rating agency believes the demand is expected to improve in FY24 on account of the uptick in orders as the inventory levels at the retailer-end normalises, which will also aid in the improvement of the operating margins due to the improved operating leverage attributed to higher capacity utilisation.