This garment stock has rallied 44% in 2 days; zoomed 114% from June low

Shares of S.P. Apparels hit a new high of Rs 1,133, as they surged 20% on the BSE in Wednesday's intra-day trade amid heavy volumes.

Shares of S.P. Apparels Limited (SPAL) hit a new high of Rs 1,133, as they surged 20 per cent on the BSE in Wednesday’s intra-day trade amid heavy volumes, extending Tuesday’s rally as the political crisis deepened in Bangladesh.

In the past two trading days, the stock of garments & apparels company has zoomed 44 per cent.  The stock has soared 114 per cent from a level of Rs 530 touched on June 4, 2024.

At 09:58 am; SPAL was trading 12 per cent higher at Rs 1,063.40, as compared to 0.82 per cent rise in the BSE Sensex. The counter has seen huge trading volumes with a combined around 700,000 shares changing hands on the NSE and BSE.

 

The textiles sector is one the major export income sources for Bangladesh with monthly apparel exports pegged at $3.5-3.8 billion. Bangladesh has a high double-digit export market share in the European Union and the United Kingdom, and a 10 per cent market share in the United States, reports suggest.

SPAL is a specialized player in the highly challenging infant & children wear knitted garment industry along with adult category. With the large network of factories, the company serves as a sourcing, manufacturing and supply chain platform with a market growth headed by children and kids wear.

India's textile industry is on the rise benefiting from significant global shifts. The “China Plus One” policy is driving businesses to diversify, with India emerging as a key player. At the same time, concerns in Bangladesh are leading international customers to seek stability and have begun to shift their focus on India and Sri Lanka for manufacturing. These trends are setting the stage for India to enhance its role in the global market, SPAL said in Q4FY24 earnings conference call.

SPAL  acquired  Young  Brand  Apparel  Private  Limited  (YBAPL)  on  June  21,  2024,  for  a  total  consideration  of  Rs  167.0  crore, which was funded through its cash reserves. In addition, it bought a garments unit in Palladam (Tamil Nadu), along with land and buildings located at Perundurai (Tamil Nadu), from Bannari Amman Spinning Mills Limited (BASML) for Rs 56 crore.

The acquisition will enable SPAL to scale up its revenues, expand into new product segments (inner wear) and widen its geographical presence in the US region, although it remains exposed to moderate stabilisation risks, according to ICRA.

SPAL’s revenue growth in FY2025 is expected to be driven by the improving demand scenario, backed by a healthy order book position and the contribution from YBAPL. The ratings also consider the favourable long-term demand prospects aided by the likely shift in procurement by large customers in the US and the EU markets from China to markets like India. Going forward, the company’s business shall remain supported by the expected improvement in operating efficiencies, as well as business and geographical diversification after the acquisition of YBAPL, the rating agency said in rationale.