Arvind’s Margins To Increase Over Top Brands: Motilal Oswal Research Report

Arvind’s retail segment margins to increase 650bp by FY16E. Brands and retail segment margins to see structural improvement from 5.4% in FY13 to 12% by FY16E, driven by consolidation of portfolio, more power brands, turnaround of loss-making new brands and improved margins in Megamart. Restructuring in garments segment led to turnaround and improvement in margins from -8% in FY10 to 11% in FY13. Plans to expand capacity from 10m pieces to 25m by FY15 to drive profitable growth. Arvind is valued at 6x FY16E EV/EBITDA, in line with five-year historical average multiple of 6.4x one-year forward EV/EBITDA. Initiate coverage with a ‘Buy’