Buy Arvind Limited for a target of Rs.81 : Ventura

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Ventura initiated coverage of Arvind Limited.

Their justification for buy recommendation is presented below.

Arvind Limited is one of the largest fabric producers in India with 200 million metres of fabric producing capacity. With ~100 mn metres fabric capacity expansion getting operational in phases over FY2010-FY2013 and robust growth in Brands & Retail business, the earnings are expected to grow at CAGR of 74.3% during FY11-13.

Monetization of its 500 acres land bank is expected to result cash flows of nearly Rs 1000 crore over a four year period which would be used to fund the capex and retire part of the debt.

We initiate coverage on Arvind Limited as a BUY with a Price Objective of Rs 81 over a period of 15-18 months. At CMP of Rs 44.1, the stock is trading at 9.2x and 5.6x its estimated earnings for FY2011E & FY2012E representing a potential upside of ~83.7%.

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