Vardhman Textiles (502986) Q3 24/25 earnings summary

Executive summary

• Q3 FY25 results were lower sequentially from Q2 but showed significant year-over-year improvement, with consolidated revenue at ₹2,465.30 crore and net profit at ₹211.77 crore for the quarter.

• Spinning business faced margin pressure due to high raw material costs, while the fabric business operated at high utilization and profitability.

• Extensive capital expenditure plans are underway, focused on modernization, sustainability, and capacity expansion, with most projects on schedule for completion within the calendar year.

• Board approved unaudited financial results and limited review reports for the quarter and nine months ended December 31, 2024.

Financial highlights

• Margins did not improve sequentially in Q3 despite lower cotton prices, as cotton inventory was procured at higher prices and yarn prices declined.

• Consolidated EBITDA and net profit margin improved year-over-year, with total comprehensive income at ₹211.79 crore.

• Standalone EBITDA margin is around 13%, down from pre-COVID levels of 18%-20%.

• Basic and diluted EPS for Q3 FY25 was ₹7.40, up from ₹5.63 in Q3 FY24.

• Total expenses for Q3 FY25 were ₹2,304.73 crore, reflecting higher input and employee costs.

Outlook and guidance

• No major margin improvement is expected in Q4 unless international cotton prices rise or yarn prices improve.

• Modernization and green energy CapEx are expected to improve margins by 200-300 basis points by FY27.

• Revenue growth will primarily come from new fabric capacity, with 45-46 million meters being added.

• Management recognized the impact of changes in capital gains tax and indexation benefits, adjusting deferred tax liabilities accordingly.