Vardhman Textiles Q1 Results Review - Inline Revenue, Healthy Margin Drives Earnings Beat: Systematix

Systematix Report

Vardhman Textiles Ltd. Q1 FY25 revenue was flat YoY and dropped 6% QoQ to Rs 23.1 billion, (broadly in-line with our estimate). We attribute the fall in revenue to 9%/7%/2% QoQ lower volumes in yarn, grey fabric and processed fabric, respectively, impacted by a challenging demand environment and elevated domestic cotton prices.

Gross margin expanded 874 basis points YoY and 435 bps QoQ to 47.5% (above our estimate at 43.2%) to benefiting from lower cotton prices. Ebitda margin expanded 578 bps YoY and 254 bps QoQ to 15.1% (above our estimate of 13%). Ebitda jumped 62% YoY and 13% QoQ to Rs 3.5 billion, above our estimate of Rs 3.1 billion.

Finance cost dropped 45% YoY and 38% QoQ to Rs 178 million. Depreciation fell 7% YoY (flat QoQ) to Rs 970 million. Other income fell 30% YoY and 2% QoQ to Rs 660 million. Profit before tax soared 73% YoY and 20% QoQ to Rs 3 billion, 24% above our estimate of Rs 2.4 billion. Tax rate was lower at 24.2% versus 26% in Q1 FY24.

Consequently, Adjusted profit after tax soared 75% YoY and 19% QoQ to Rs 2.4 billion (25% above our estimate of Rs 1.9 billion). APAT margin expanded 444 bps YoY and 217 bps QoQ to 10.3% (above our estimate of 7.9%). Management expects the upcoming festive season in India and improving inventories in the U.K and U.S to drive demand in the coming quarters.

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