Vardhman Textiles Q4 Results Review - Healthy Operating Performance, Inline With Estimates: Systematix

Systematix Research Report

Vardhman Textiles Ltd.’s reported a strong Q4, marked by healthy Ebitda (inline with estimates) and Ebitda margins surpassing estimates. Q4 revenue fell marginally by 1% YoY and grew 6% QoQ to Rs 24.6 billion (8% lower than our estimate).

Sales volumes in yarn/grey/processed fabric grew by 5%/20%/24% YoY, respectively, on improving demand momentum. Gross margin expanded 471 bps YoY and 32 bps QoQ to 43.2% (estimated at 43%) on soft raw material prices and inventory gains. Ebitda reported double-digit growth of 18% YoY and 26% QoQ to Rs 3.1 billion, inline with our estimate.

Ebitda margin expanded 199 bps YoY and 205 bps QoQ to 12.5% (above our estimate of 11.6%). Finance cost declined 6% YoY but increased 47% QoQ to Rs 285 million. Depreciation fell 7% YoY and 3% QoQ to Rs 968 million.

Other income fell 11% YoY and 10% QoQ to Rs 672 million. Adjusted profit after tax grew 26% YoY and 25% QoQ to Rs 2 billion (in line). Consequently, APAT margin expanded 177 bps YoY and 128 bps QoQ to 8.2% (estimated at 7.5%).

Management said demand for yarn and fabric in the domestic as well as export markets has improved over the last few quarters and expects the momentum to sustain.

Normalisation of channel inventory and supply chain are supporting the improving demand.

To cater to the rising demand, management is strategically focused on enhancing and modernising its existing capacities and operational efficiencies. In addition to the Rs 2 billion expansion announced in Feb 2024, it has planned a capex of Rs 20 billion, which it expects to complete by FY26.

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