Arvind Ltd Upgraded to Buy by MarketsMOJO on Strong Financial and Technical Grounds

Quality Assessment: Robust Financial Performance and Operational Efficiency

Arvind Ltd’s quality metrics have strengthened notably, driven by its impressive financial results for Q3 FY25-26. The company reported a healthy operating profit growth at an annualised rate of 41.04%, underscoring its operational efficiency in a competitive textile industry. Profit after tax (PAT) for the latest six months stood at ₹217.14 crores, marking a robust growth of 33.10% compared to the previous period.

Return on Capital Employed (ROCE) has reached a peak of 12.99% in the half-year period, reflecting effective capital utilisation and profitability. Additionally, the operating profit to interest coverage ratio has improved to 6.54 times, indicating strong debt servicing capability and financial stability. These quality parameters collectively justify the upgrade in the company’s Mojo Grade to Buy, with a current Mojo Score of 74.0, up from a previous Hold rating.

Valuation: Attractive Pricing Relative to Peers and Historical Benchmarks

Arvind Ltd’s valuation metrics present a compelling case for investors. The company’s ROCE of approximately 12% supports a very attractive valuation, with an Enterprise Value to Capital Employed (EV/CE) ratio of just 2.1. This valuation is notably discounted when compared to the average historical valuations of its peer group within the Garments & Apparels sector.

Moreover, the stock’s Price/Earnings to Growth (PEG) ratio stands at a low 0.6, signalling undervaluation relative to its earnings growth potential. Over the past year, Arvind Ltd has delivered a share price return of 17.06%, outperforming the Sensex’s 9.66% return in the same period. This outperformance is supported by a 39.8% increase in profits, highlighting the stock’s favourable risk-reward profile.

Financial Trend: Consistent Growth and Institutional Confidence

Arvind Ltd’s financial trajectory remains positive, supported by consistent returns and strong institutional backing. The company has outperformed the BSE500 index in each of the last three annual periods, delivering a remarkable 351.92% return over three years and an extraordinary 470.02% over five years, compared to the Sensex’s 35.81% and 59.83% respectively.

Year-to-date, the stock has gained 19.06%, while the Sensex has declined by 2.28%, further emphasising Arvind’s resilience and growth momentum. Institutional investors hold a significant 35.82% stake in the company, reflecting confidence from sophisticated market participants who typically conduct rigorous fundamental analysis before committing capital.

These financial trends, combined with the company’s strong quarterly results and improving profitability metrics, underpin the positive outlook and justify the upgrade in investment rating.

Technical Outlook: Shift to Mildly Bullish Momentum

The technical landscape for Arvind Ltd has improved, contributing to the upgrade in its overall rating. The technical trend has shifted from sideways to mildly bullish, signalling a more favourable price action outlook. Key technical indicators present a mixed but generally positive picture:

• MACD on the weekly chart is bullish, although the monthly MACD remains mildly bearish, suggesting short-term momentum is stronger than the longer-term trend.
• Relative Strength Index (RSI) shows no significant signals on both weekly and monthly timeframes, indicating the stock is neither overbought nor oversold.
• Bollinger Bands indicate mild bullishness on the weekly chart and a bullish stance on the monthly chart, supporting the case for upward price movement.
• Moving averages on the daily chart are mildly bearish, reflecting some near-term caution.
• KST (Know Sure Thing) oscillator is bullish weekly but mildly bearish monthly, again highlighting short-term strength.
• Dow Theory analysis shows no clear trend weekly but a mildly bullish trend monthly.
• On-Balance Volume (OBV) is neutral weekly but bullish monthly, suggesting accumulation over the longer term.

Despite a 2.03% decline in the stock price on the day of the rating change, the technical indicators collectively point to a positive momentum shift, supporting the upgrade to a Buy rating.

Comparative Performance and Market Context

Arvind Ltd’s stock price currently trades at ₹377.35, down slightly from the previous close of ₹385.15. The 52-week high stands at ₹404.95, while the 52-week low is ₹271.55, indicating a wide trading range and potential for upside. Despite the recent short-term dip, the stock’s long-term performance remains impressive, with a 10-year return of 36.67%, albeit below the Sensex’s 259.08% over the same period.

Shorter-term returns are particularly strong, with a one-month gain of 25.95% compared to the Sensex’s marginal decline of 0.35%, and a one-week decline of 2.66% versus the Sensex’s 0.94% drop. This volatility is typical in the textile sector but the overall trend remains positive.

Arvind Ltd’s market capitalisation grade is rated 3, reflecting its mid-cap status within the Garments & Apparels sector. The company’s strong fundamentals, improving technicals, and attractive valuation metrics position it favourably against sector peers and broader market indices.

Conclusion: A Convincing Upgrade Backed by Multi-Factor Strength

The upgrade of Arvind Ltd’s investment rating from Hold to Buy is well supported by a confluence of factors. The company’s quality metrics have improved with strong profitability and capital efficiency. Valuation remains attractive relative to peers and historical norms, offering investors a favourable entry point. Financial trends demonstrate consistent growth and institutional confidence, while technical indicators signal a shift towards bullish momentum.

Investors looking for exposure in the Garments & Apparels sector may find Arvind Ltd’s current profile compelling, given its solid fundamentals and positive outlook. The company’s ability to deliver consistent returns and maintain operational strength amid market fluctuations further enhances its appeal.

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