LUX INDUSTRIES – Can it Scale?

I am not an expert on commodity cycles. But cotton prices seems to be on a rampage and are not showing any sign’s of reprieval.

CNBC report says that the cotton prices hit 75,000 by the mid of this years.
Article: Cotton prices could rise to Rs 75,000 per candy by mid-2023, says Cotton Association of India

The chart shows how cotton prices have flared up overtime. Global issues like COVID, Ukraine War, Climate issues have made prices go astronomical. The cotton prices have gone up 137% is the last 9 months. See the below image.

All industries dealing with cotton are going to face headwinds with raw material cost. Lux Industries also mentioned the same in the Annual report. But long term contracts with buyers should give them some relief.

Need to wait and watch if the cotton prices are going to comeback to 15K to 25K range? The company currently uses 90% blended cotton. They could play with the blend further if cotton prices don’t correct or increase prices slowly.

Disclosure: Not invested. Definitely interested.