Shares of textile companies bucked the weak market trend and managed to rally as improving exports of cotton and made-up apparel, along with attractive valuation and earnings growth visibility, made analysts bullish on the sector. Shares of Super Fine Knitters, Super Spinning, and Filatex India rallied up to 10% last week. Those of JCT, Surat Textile, Swasti Vinayaka, KPR Mill, Sumeet Industries, Bhandari Hosiery, Minaxi Textiles, and Bombay Rayon, gained between 4-5%, and Gokaldas Exports and Vardhman Textiles also ended in the green.
The Covid-19 pandemic, the US-China trade war, has altered the global textile and apparel supply chain with several brands preferring more than one sourcing destination, with India emerging as the preferred destination. And local and export demand for Indian textiles and apparel is fairly robust.
The stocks in the sector are ripe for a rerating as robust export opportunities give strong and sustainable earnings visibility, say analysts at ICICI Securities. “Revival in the hospitality sector, along with duty reimbursement by the government of India, and market share gain on China+1 theme will drive earnings trajectory.
Spread between yarn and cotton prices continues to remain high and should enable yarn producers to report strong earnings for Q3FY22,”.
