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    Textile companies could 'sprint and soar' with FTAs, Govt push

    Synopsis

    ​​The firm said it has been ‘gloom and doom’ for the domestic industry in the past few months because of high cotton prices and low demand for textiles and apparel in Western countries.

    textileGetty Images
    Demand uptick and lower cotton prices remain key triggers
    Brokerage firm Emkay Global has initiated coverage on textile firms Vardhman, Gokaldas Exports and Nitin Spinners with a buy rating as the government’s incentives for the sector, the shift in business from China to other countries, and trade agreements could help the domestic industry ‘sprint and soar’.

    The firm said it has been ‘gloom and doom’ for the domestic industry in the past few months because of high cotton prices and low demand for textiles and apparel in Western countries.

    “New FTAs (free trade agreements) would offer opportunities to large established players, capturing a higher wallet share by entering into adjacencies in existing geographies,” said Emkay’s analysts Abhineet Anand and Chinmay Kabra in a recent note to clients.

    “Textile PLI (productionlinked incentive) schemes by the government are largely focused on MMF (man-made fibre) — a weak point presently, for the Indian textile industry — which will help to build an ecosystem similar to cotton textiles’, over the medium term.”

    Vardhman Textiles
    CMP: Rs 293.50
    Target Price: Rs 455
    Upside Expectations: 55%
    YTD Stock Movement: -41%

    • Best placed to withstand current woes in the textile sector; strong balance sheet
    • Country’s largest spinning capacity, better utilisation and higher realisation versus peers
    • Debt-to-equity ratio stands at 0.24 times versus 1.24 times a decade ago

    Nitin Spinners
    CMP: Rs 184
    Target Price: Rs 310
    Upside Expectations: 68%
    YTD Stock Movement: -32%

    • Moved up the value chain by widening the product portfolio
    • On track to increase yarn, knitting and weaving capacities by 30-50% over 12-15 months
    • Demand uptick and lower cotton prices remain key triggers

    Gokaldas Exports
    CMP: Rs 342.50
    Target Price: Rs 575
    Upside Expectations: 68%
    YTD Stock Movement: 4.4%

    • Better return on equity (RoE) profile and higher earnings prospects
    • During FY22-25, earnings per share will grow 24% and RoE will be at 18%
    • Five-year average priceto-earnings (PE) ratio at 14 times, with a 14% RoE




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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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