ICICIDirect Research has initiated research on Nitin Spinners, a stock which is also owned by seasoned Dalal street investor like Dolly Khanna.
Nitin Spinners is textile company which has moved to become a sizeable pure spinning company in India’s yarn market. The company has integrated into knitted and finished woven fabrics in its product portfolio, yielding more better margins.
Nitin Spinner’s revenues have grown at a CAGR of 20 per cent over FY12-22. The quality of revenue growth is balanced with volumes increasing at a CAGR of 13 per cent while realization has grown by 7 per cent over the period, said ICICIDirect.
Shares of Nitin Spinners have tumbled 30 per cent in the last one year, whereas the stock has remained flat in the last six-month period. However, it has jumped about 80 per cent in the last five years.
Exports, which contribute 65-70 per cent of revenues, have grown 6.5x (21 per cent CAGR) during FY12-22. The yarn segment mainly caters to exports whereas the fabrics division is more inclined towards the domestic market, said.
The brokerage said that vertical integration of the business aids it to meet requirement for fabric division in-house and supports the EBIDTA growth with has grown at a CAGR of 15-17 in the last 10 years.
In FY22, the company reported a net sale of Rs 2,692.3, rising at a CAGR of 24 per cent, with an EBITDA at Rs 647.1 crore, growing at a CAGR of 17 per cent. In FY 22, company’s return on equity (RoE) and return of capital employed (RoCE) stood at 3.7.2 per cent and 35.9 per cent.
In FY24 and FY25, the brokerage expects company’s revenue to rise by 18 per cent CAGR to Rs 2,711.6 crore and Rs 3,145.4 crore, with EBITDA growing 25.6 per cent CAGR to Rs 433.1 crore and 529.1 crore, respectively, said the brokerage.
Efficient utilization of assets has led to revenue growth over the last decade and in future, capacity expansion across the segments is likely to drive the revenue growth, keeping the RoE and RoCE levels superior to the average, said the brokerage.
Celebrity investor Dolly Khanna held 8,51,793 equity shares or 1.52 per cent stake in the company by the end of September 2022 quarter. The company is yet to file its December 2022 shareholding pattern.
“Consistent improvement in financial performance of Nitin Spinners in spite of cyclical nature of textile industry signifies its ability of optimum asset utilization leading to sustainable profit growth. In line with its superior fundamental performance, the stock price has grown at 15% CAGR over last five years,” said ICICIDirect.
“We believe Nitin Spinners, with its presence across textile value chain is well poised to capture the export opportunity in global textile trade,” it added initiating covered with a ‘buy’ rating and a target of Rs 290, suggesting a 40 per cent upside.
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