Q2FY24 results are out

Company added 100 Cr. in inventory which is now at ~498 Cr.
Cash equivalents ~ Rs.233 Cr.
Mcap ~ 880 Cr.

Management’s reply in AGM when asked about high inventory levels.
(https://youtu.be/ZrKdOYeM1D8?t=2539)

1. Will not succmb to buyer’s pressure and will only sell with good margins as we are producing the best quality.
2. Expecting lot of changes from December onwards as most of the mills have closed down (MSME). Pipeline is empty. Hopeful of Bulk production demand.
3. Have been in the markets for 33 years. Buyer’s prefer to buy from Ambika due to quality.
4. Debtors are lowest in the industry. Selling in Cash and on LC. Zero bad debts.

The above inventory levels suggest management is walking the talk and is bullish in near future.

Gokaldas exports quartely presentation is a good read to understand global demand scenario for apparels. (https://www.gokaldasexports.com/wp-content/uploads/2023/10/Investor-Presentation-2QFY24-Gokaldas-Exports-1.pdf)

“We are expecting a decent momentum in the second half of the year, particularly with Q3 production for Spring 2024, as brands have more or less destocked their inventory and are increasing their
order placements. We anticipate sequential growth to pick up in the next two quarters.”

Welsupn and Indo Count (Bedding, Towels etc) have also seen increased buying from all major retailers for the upcoming holiday season in the US.

FTA with UK will provide huge tailwind to the sector. Overall, the sector seems to be in good bullish trend. It will be interesting to see how Ambika management’s call plays out in next 2-3 quarters.

Discl: Invested

Considering the management does not like giving revenue guidance, how does one value Neuland in-regards to at what price is it under valued, correctly valued or over valued. What metrics should one be using to evaluate the valuations so that one can make a better and informed decision when increasing or reducing allocation?

I have been in their conference calls. I feel management lacks fire. I agree limited downside but don’t agree to unlimited upside. I will give them some more time before exiting to prove me wrong. Issues I see are

1. They knew CLAT test had moved and crash course will be of no value. They were found sleeping and did nothing.
2. CUET progress is too slow.
3. It seems they have lost market share in MBA as well
4. The metaverse that they show in very toyish built by interns it seems

Invested and Biased.

Please study the business as a whole. There is also a martech division. And as Vineet ji pointed out above is part of the answer too