Sharekhan Picks 4 Stocks From Textile Sector With Positive & Buy Recommendation, Sees Up To 33% Gain

Sharekhan has maintained its positive view on the textile sector. The brokerage picks 4 stocks from the sector with Buy & Positive recommendations. The brokerage has assigned a Buy rating on Gokaldas Exports and KPR Mill, while a Positive outlook view on Himatsingka Seide SP Apparels.

If the stocks are purchased at the current market price, it likely to give a decent retruns of up to 33% considering the assigned target price by the brokerage firm.

Textiles - On the cusp of an upcycle

According to Sharekhan, The Indian textiles sector is strategically consolidating its position in key export markets such as home textiles and readymade garments, capitalising on opportunities arising from the US-China trade war. India has witnessed a notable increase in its share of exports in these segments to the US. After challenging and subdued FY2023 affected by muted demand, higher retailer inventory, supply constraints, and rising cotton prices, the textile companies believe the worst is over and anticipate a demand revival by Q3FY2024 with reducing inventories on global retailers' shelves.

Further, factors such as the "China + 1" strategy, geopolitical uncertainties in competitor countries, and potential free-trade agreements (FTAs) with the UK and Europe offer promising prospects for consistent earnings growth and improved cash flows. With material capex already completed, textile players are poised to leverage their expanded capacities. Moreover, falling cotton and crude prices are expected to bolster margins and enhance India's competitiveness in export markets. The Indian textile sector is well positioned to overcome challenges and looks forward to ride the next upcycle

View and Preferred picks; upgrade outlook on sector to Positive

According to Sharekhan, Textile companies with a better product profile, strong export clientele, an integrated business model and expanded capacities are expected to post strong double-digit earnings growth of 20-41% over FY2023-25E, which is much better as cw to earlier years."

"In view of strong medium to long term outlook, we are upgrading our view on textile sector Positive from Neutral earlier. With a recovery on cards, we believe it is right time to invest in some of quality textiles companies with strong growth prospects and under stressed balance sheets. We prefer Gokaldas Exports, KPR Mill and SP Apparels in the garment space while we prefer Himatsingka Seide in the home textile space," the brokerage has said.

Stocks - CMP, Recommendation, TP, and Potential Upside

*CMP as on 14 June 2023

Disclaimer - The stocks have been picked from Sharekhan's report on the Taxtile sector. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.