Vardhman Textiles Gains Over 19% Intra-Day: Here's Why

The textile scrip Vardhman Textiles in trade on July 18, 2022 surged by a sharp over 19% intra-day. This seems to end the 4-day losing streak for the stock. Punjab based textile manufacturer is slated to report its Q1Fy23 earnings this week.

As per the ICICI Direct report, " Cotton prices have already cooled down toRs. 80,000-85,000 per candy (356 kg) and forward contacts for October- November are priced at Rs. 66000 to Rs. 68000 per candy. The likelihood of an increased cotton production (at least 10% higher sowing) in the ensuing year is likely to further reduce the prices of cotton. We believe that lower cotton prices would be beneficial for the entire textile value chain and should lead to improved utilisation and better profitability for all players in the cotton textile product".

Notably in May cotton prices hit the roof on below par production.

Also, the company split its share in the ratio of 1:5.

On Vardhman, ICICI Direct maintains a hold rating with a target price of Rs. 285 per share.

"Elevate cotton prices have been the pain point for Indian textile exporters. The main reason for significant increase in cotton prices has been lower production estimates by industry bodies like Cotton Corporation of India (CCI) and increased consumption demand. In 2020-21, India total cotton lint fibre output was 353 lakh bales (lb) of 170 kg each. For 2021-22, production estimate released by CCI in May 2022 has estimated cotton production at 323.63 lb (~ 8% lower YoY). Also CCI is expecting the consumption of cotton to increase to 345 lb in 2021-22 compared to 334.87 lb in year 2020-21 (~ 3% higher YoY). Lower cotton availability for the mills has led to spiralling of cotton prices, which have almost doubled over the last one year", said the brokeage in its update on the sector.

GoodReturns.in