Stock Review: Arvind

The immediate trigger for the stock to move higher is the monetization of the land. They have 12 million sq ft of which, they have already inked agreement for that about 9 million. Tata Housing got a deal for 134 acres of land and 3 million sq ft is with other developers. Over the next couple of years, the company should be able to generate about Rs 1500 crore from this.

Arvind is currently sitting on close to one-third the land bank. If they knock off the about Rs 1800 crore debt, that will make the position of the company quite healthy.

The interest burden of the company is more than Rs 200 crore on an annualized basis.

However, Q1 is giving quite some comfort recording a topline of Rs 1200 crore with EPS of close to Rs 2.50. FY12 EPS could easily be a double digit, close to about Rs 10 from core operations.

Arvind is the largest denim maker in the world with 110 million sq ft capacity and integrated textile plant. Their shirting division has been doing quite well and fall in the cotton prices bodes well for them. These factors and the foray of the company into retail are going to be a big kicker for revenue. This replicates the trend of Raymond , which also is monetizing land, and has strong brand equity.

Taking all this into consideration, I am quite convinced and attracted to the stock and expect that, maybe in the near-term, in the next 2-3 months, Arvind's shares should move to about Rs 90. It has the capability to breach three digit mark in the next 8-10 months time.