Recommendation from Textile Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.[EasyDNNnews:PaidContentStart]

Pearl Global Industries Ltd : GLOBAL APPAREL SCALE DRIVES GROWTH

HERE IS WHY
✓  Strong Q1 revenue momentum
✓  Diversified global manufacturing footprint
✓  Capacity-led margin expansion ahead

The global textile and apparel industry continues to expand, supported by rising international sourcing and diversification of manufacturing bases. According to the August 2026 issue of The Textiles Observer, published by the International Cotton Advisory Committee (ICAC), global textile exports increased from approximately USD 560 billion in 2006 to USD 914 billion in 2025. Within this, knit garment exports nearly doubled from USD 145.2 billion to USD 289.1 billion, while woven garment exports increased from USD 158.5 billion to USD 257.7 billion. Knit and woven garments together accounted for nearly 60 per cent of global textile exports in 2025.

The industry is also witnessing a shift in sourcing towards countries such as Bangladesh, Vietnam and India as global retailers diversify supply chains. This structural shift provides an opportunity for large, multi-country manufacturers such as Pearl Global Industries (PGI). Considering these factors, we recommend PGI as our Choice Scrip. PGI is a global apparel manufacturer. Its diversified manufacturing footprint allows customers to source different categories from multiple locations, helping the company respond to changing trade conditions and sourcing requirements. The company shipped 20.8 million pieces in Q1 FY27, its highest-ever Q1 shipment volume, compared with 17.2 million pieces in Q1 FY26. The company's revenue mix is increasingly global. In Q1 FY27, India contributed about ₹340 crore, while the rest of the world contributed around ₹1,188 crore, meaning roughly three-fourths of revenue came from outside India. Product-wise, knits accounted for 74 per cent and woven products for 26 per cent of revenue in Q1 FY27.

The company delivered a strong Q1 FY27 performance, with consolidated revenue rising 24.4 per cent YoY to ₹1,528 crore, the company's highest-ever quarterly revenue. Adjusted EBITDA increased 43.9 per cent YoY to ₹164 crore, while EBITDA margin expanded by 140 bps to 10.7 per cent, supported by a better product mix and operating leverage. PAT rose 50 per cent YoY to ₹99 crore.

A major growth driver is PGI's ability to expand relationships with both existing and newer customers. At its 2026 Investor Day, management highlighted that customers added during the previous five years contributed 48 per cent of FY26 revenue, up from 25 per cent in FY23. This indicates that newer customer relationships are becoming an increasingly important source of incremental growth. The company is also expanding into newer product categories and strengthening its presence in higher-value apparel. Management outlined a target of ₹9,000–10,000 crore in revenue by FY30, implying a 16–18 per cent CAGR from FY26, along with capacity of approximately 170–175 million pieces and an EBITDA margin target of 12–14 per cent. The strategy is expected to be supported by new customers, higher wallet share, capacity additions, newer product categories and improved utilisation.

Pearl Global maintains a relatively healthy financial profile, with ROCE of 19.9 per cent, ROE of 21.0 per cent, debt-to-equity of 0.65x and a current ratio of 1.60x. Its three-year sales and profit growth stand at approximately 16.7 per cent and 25.4 per cent, respectively. The stock trades at around 38.2x P/E, compared with an industry P/E of 26.6x and its three-year median P/E of 25.8x. The PEG ratio of 1.51 also indicates that the stock commands a premium valuation. However, the premium needs to be viewed alongside the company's strong earnings growth, global scale, capacity expansion and management's FY30 growth ambitions. Hence, we recommend BUY.

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