Buy Nitin Spinners; target of Rs 800: Emkay Global Financial

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Yarn realization growth: NSPL's yarn realization, including FX gains, rose ~10% qoq to Rs333/kg, outpacing cotton fiber costs, driven by strong demand and supply dynamics.
  • Healthy spreads: The company's average spread stood at Rs125-130/kg in 2Q, with implied yarn EBITDA/kg of Rs64, indicating robust profitability.
  • Capacity expansion: NSPL targets Rs48-50bn revenue by FY29, with new fabric capacity expected to add Rs3-3.5bn of revenue in FY27 and ~Rs10bn in FY28.
  • Margin discipline: The company aims for an EBITDA margin of 18-18.5% in the near term, with 100-150bps cost savings from RE power generation.

Thesis Validation Checklist

To validate the investment thesis, watch for:

  • Yarn spreads: Stability or improvement in yarn spreads, indicating continued profitability.
  • Capacity utilization: Progress in commissioning new fabric capacity and achieving targeted utilization rates.
  • Revenue growth: Achievement of revenue targets, particularly from new capacities.
  • Margin performance: Maintenance of EBITDA margins within the guided range, reflecting effective cost management.