Sanathan Textiles Punjab plant ramp-up targets stronger FY29 revenue growth and margins

Investment View and Valuation

Emkay Global Financial Services’ September 29, 2026 visit note on Sanathan Textiles retains its BUY recommendation following a visit to the Punjab plant and meetings with senior management. The broker is positive on the new plant’s ramp-up in North India, which it believes can enable market-share gains through location advantage, customer proximity and a growing market.

Emkay retained its earnings estimates and raised its 12-month target price by 8% to Rs675 from Rs625, valuing the stock at 13 times 2QFY29E EPS after rolling forward the valuation period.

Punjab Plant Ramp-up and Growth Outlook

The key operating development is the Punjab plant. Phase 1 capacity of 700 tonnes per day was running at around 99% utilisation at the time of the visit. Management expects the plant to reach around 950 tonnes per day after commissioning the 250 tonnes-per-day Phase 2 brownfield expansion in 2HFY27.

Civil work was complete, machinery was expected in 3QFY27 and commissioning was planned in a calibrated manner. At 950 tonnes per day, management expects Punjab alone to generate revenue of Rs41-43 billion. Emkay expects this to support consolidated revenue of Rs72-75 billion in FY29, driven by market-share gains and proximity-led demand.

Customers told Emkay that the Punjab site can reduce their inventory requirement by around 15 days, in addition to product-quality benefits.

Margin Expansion and Operating Advantages

Punjab EBITDA margin was around 2.5%, or approximately Rs2,800 per tonne, in 1QFY27. Management expects margin to rise to around 12% at 1,000 tonnes per day, supported by operating leverage, lower freight, cheaper power, the use of locally sourced rice husk instead of gas for heating, and automation that eliminates around 99% of handling losses.

• Freight to North Indian customers is Rs800-1,000 per tonne from Punjab versus around Rs5,000 per tonne from the west.
• Punjab power cost is around Rs5 per unit versus Rs6 per unit at Silvassa.
• Management said higher input costs can be passed through, noting that yarn prices had risen around 30% over the preceding four to five months amid stronger demand.
• A roughly Rs40 per kg increase in yarn price adds only around Rs20 to a shirt retailing at Rs1,000-1,200.

Balance Sheet, Incentives and Deleveraging

At the consolidated level, management targets an EBITDA margin of 11-12% and ROCE of 16-18% by FY29, supported by a richer cotton and technical-textiles mix. The Punjab plant is eligible for around Rs10 billion of tax incentives over 17 years.

Management believes long-term debt has peaked at around Rs13 billion and targets repayment of around Rs1 billion annually for the next two years. Emkay expects the Punjab plant’s negative working-capital cycle, with 60-day credit from IOCL against 35-40 day customer collections, to aid deleveraging.

It forecasts net debt to EBITDA falling to 1.1 times in FY29E from 3.1 times in FY27E, within management’s preferred 1.0-1.3 times range.

Financial Forecasts

Key Risks and Dependencies

The report does not state formal risks, but its thesis depends on timely Phase 2 commissioning, sustained Punjab utilisation, margin ramp-up, pass-through of input-cost inflation and planned deleveraging.