Vardhman Textiles (502986) Q1 24/25 earnings summary

Executive summary

• Business performance improved in Q1 FY25, aided by strategic raw material coverage and favorable market conditions early in the quarter.

• The company benefited from lower cotton procurement costs before prices rose post-season, supporting margins.

• China Plus One strategy is driving increased international demand, especially from US buyers, and is seen as a long-term opportunity.

• Consolidated revenue from operations for Q1 FY25 was ₹2,308.59 crore, down from ₹2,459.41 crore in the previous quarter but nearly flat year-over-year.

• Consolidated net profit after tax stood at ₹239.77 crore, up from ₹202.13 crore in the previous quarter and ₹136.60 crore in Q1 FY24.

Financial highlights

• Achieved 15% margin in Q1 FY25, a significant improvement after a prolonged period.

• Q1 revenue was approximately INR 2,300 crore; annualized, this could reach INR 9,200 crore, with a stretch target of INR 10,000 crore for FY25.

• Standalone net profit after tax was ₹226.90 crore, up from ₹186.63 crore in the previous quarter and ₹131.43 crore in Q1 FY24.

• Gross debt as of June stood at INR 1,150 crore (INR 900 crore long-term), with cash and investments at INR 1,800 crore.

• Average cost of debt is around 8%, and investment yields are also about 8%.

Outlook and guidance

• Management is optimistic about reaching INR 10,000 crore in sales for FY25, though this is considered an optimistic target given no major capacity expansion this year.

• Sustaining 15% margins will be challenging due to high domestic cotton prices and global price pressures; margin improvement depends on utilization and market normalization.

• Expectation of increased demand in Q3 and Q4 from the Indian market due to festive and marriage seasons.

• No explicit forward-looking guidance provided, but results reflect improved profitability and stable revenue in a challenging market.