Recommendation from Textiles Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon [EasyDNNnews:PaidContentStart]

GHCL Textiles Ltd : WEAVING GROWTH INTO THE PORTFOLIO

HERE IS WHY
✓  Moving Up the Value Chain
✓  Fabric Share on the Rise
✓  FTAs Open New Opportunities

I ndia’s textile sector is seeing improving operating conditions, supported by better yarn-cotton spreads, resilient domestic demand and expanding export opportunities. GHCL Textiles (GHCL) is positioned as a higher-value cotton and blended yarn manufacturer with advanced facilities in Tamil Nadu. The company operates approximately 225,000 spindles at near-full utilisation and is moving beyond spinning into knitted and greige fabrics. Its emphasis on specialised yarn, vertical integration and renewable energy reinforces its competitive position.

GHCL Textiles operates primarily across two segments, yarn and fabric, with yarn remaining the core business and fabric emerging as the key value-added growth area. In Q1 FY27, spinning capacity utilisation stood at 99 per cent, while fabric contributed 15.6 per cent of revenue compared with 9.3 per cent in Q1 FY26. The company also has 65 MW of renewable energy capacity, meeting approximately 70 per cent of its electricity requirement and supporting cost efficiency.

The outlook for the Indian textile sector remains constructive. Management indicated that domestic textile demand has been growing by approximately 6 percent to 8 per cent year on year. International export prospects have also strengthened through preferential-trade agreements. Under the India-UK CETA, tariffs of approximately 8 per cent to 12 per cent on yarn, fabrics and garments are reduced to 0 per cent. The company’s presentation estimates India’s textile and apparel exports to the UK could increase from approximately USD 1.9 billion to USD 3.5 billion to USD 4 billion over three to five years. GHCL’s export contribution strengthened to 11 per cent of revenue in Q1 FY27 from 6.1 per cent a year earlier.

The key growth catalyst is the company’s move towards higher-value fabric products. GHCL intends to expand knitting capacity to 40 machines and later move into weaving, processing and ready-to-cut fabrics. Management expects fabric to eventually contribute approximately 30 per cent to 40 per cent of revenue. The recently commissioned 25,000-spindle unit is expected to generate approximately ₹250 crore of annualised revenue under normal operations. Management is targeting revenue of approximately ₹2,000 crore by FY29, underpinned by ₹350 crore to ₹400 crore of committed investment in fabric and processing. An additional 11 MW Solar project and the proposed PM MITRA Park facility are other capacityexpansion initiatives.

Principal risks include volatility in cotton prices and yarn-cotton spreads, which can influence profitability. Weakness in domestic or export demand may also influence realisations. Delays in fabric expansion could slow the transition towards higher-value products. Working capital remains a monitorable factor, as FY26 operating cash flow declined to ₹4.55 crore despite a profit of ₹70.37 crore, while trade receivables increased to ₹170.59 crore.

GHCL reported FY26 revenue of ₹1,335 crore and EBITDA of approximately ₹156 crore, translating into an EBITDA margin of approximately 11.7 per cent. In Q1 FY27, revenue increased 52 per cent year on year to ₹410 crore, EBITDA rose 116 per cent to ₹70 crore and PAT increased 191 per cent to ₹39 crore. EBITDA margin expanded to 17 per cent from 12 per cent a year earlier.GHCL trades at a P/E of 12.6x, below its three-year median P/E of 15.3x and the industry P/E of 18.9x. The Dividend yield stands at 0.49 per cent. The outlook is underpinned by increasing fabric contribution, vertical integration, planned capacity additions and strengthening margins, while cotton prices, execution and working capital remain key monitorables. Keeping the above factors in mind, we recommend BUY.

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