MarketsMOJO Upgrades Arvind Ltd to Buy on Strong Financials and Technical Shift

Quality Assessment: Strong Operational and Profit Growth

Arvind Ltd’s quality rating has improved significantly, driven by its impressive operational metrics and profitability. The company reported a healthy operating profit growth at an annualised rate of 41.04%, underscoring its ability to scale earnings efficiently. The latest half-yearly performance reveals a profit after tax (PAT) of ₹217.14 crores, which has grown by 33.10%, reflecting strong bottom-line momentum.

Return on Capital Employed (ROCE) stands at a robust 12.99%, the highest recorded in recent periods, indicating effective capital utilisation. Additionally, the operating profit to interest coverage ratio has reached 6.54 times, highlighting the company’s comfortable debt servicing capacity. These quality metrics collectively reinforce Arvind Ltd’s operational resilience and financial discipline, justifying the upgrade in its quality grade.

Valuation: Attractive Relative to Peers and Historical Levels

From a valuation standpoint, Arvind Ltd presents a compelling case for investors. The stock currently trades at ₹370.00, up from the previous close of ₹359.50, and remains below its 52-week high of ₹404.95, offering a margin of safety. The company’s Enterprise Value to Capital Employed ratio is a modest 2.1, signalling a very attractive valuation compared to its sector peers.

Despite a one-year stock return of 6.17%, the company’s profits have surged by 39.8% over the same period, resulting in a low PEG ratio of 0.6. This indicates that earnings growth is not yet fully priced into the stock, presenting an opportunity for value-oriented investors. The valuation upgrade reflects this favourable risk-reward profile, especially in the context of the broader Garments & Apparels industry where valuations have been more stretched.

Financial Trend: Positive Momentum Sustained

Arvind Ltd’s financial trend has been consistently positive, with the latest quarterly results for Q3 FY25-26 confirming the company’s growth trajectory. The firm’s operating profit growth and PAT expansion are supported by strong institutional holdings, which currently stand at 35.82%. This high level of institutional interest suggests confidence from sophisticated investors who typically conduct rigorous fundamental analysis.

Comparing stock returns with the benchmark Sensex reveals Arvind Ltd’s outperformance over multiple time horizons. The stock has delivered a 1-week return of 23.99% versus Sensex’s 1.79%, a 1-month return of 16.32% against Sensex’s negative 2.27%, and a year-to-date return of 16.74% compared to Sensex’s -1.65%. Over longer periods, the stock’s 3-year and 5-year returns of 345.51% and 613.60% respectively dwarf the Sensex’s 37.76% and 65.60%, highlighting the company’s sustained growth and value creation.

Technical Outlook: Shift from Mildly Bearish to Mildly Bullish

The technical grade for Arvind Ltd has been upgraded, reflecting a shift in market sentiment and price momentum. The technical trend has moved from mildly bearish to mildly bullish, supported by several key indicators. On a weekly basis, the Moving Average Convergence Divergence (MACD) is mildly bullish, while the monthly MACD remains mildly bearish, suggesting a near-term positive momentum with some caution over the longer term.

Bollinger Bands on both weekly and monthly charts are bullish, indicating that the stock price is trending upwards with increasing volatility. The On-Balance Volume (OBV) indicator is also bullish on weekly and monthly timeframes, signalling strong buying interest. Dow Theory assessments for both weekly and monthly periods are mildly bullish, reinforcing the positive technical outlook.

However, some indicators such as the Relative Strength Index (RSI) show no clear signal, and the daily moving averages remain mildly bearish, suggesting that short-term volatility and consolidation may persist. The KST (Know Sure Thing) oscillator is mildly bearish on both weekly and monthly charts, indicating that momentum is not yet fully established. Overall, the technical upgrade reflects a cautious but optimistic stance on the stock’s price trajectory.

Market Performance and Price Action

Arvind Ltd’s stock price has demonstrated resilience and strength in recent trading sessions. The current price of ₹370.00 represents a 2.92% gain on the day, with intraday highs reaching ₹378.80 and lows at ₹352.00. The stock remains comfortably above its 52-week low of ₹271.55, signalling a strong recovery and investor interest. This price action aligns with the improved technical indicators and positive financial results, supporting the upgraded investment rating.

Conclusion: A Convincing Upgrade Backed by Fundamentals and Technicals

The upgrade of Arvind Ltd’s investment rating from Hold to Buy is well justified by a confluence of factors. The company’s strong financial performance, highlighted by robust profit growth, high ROCE, and excellent interest coverage, demonstrates operational excellence. Valuation metrics indicate the stock is attractively priced relative to peers and historical levels, with a PEG ratio of 0.6 signalling undervaluation relative to earnings growth.

Financial trends remain positive, supported by strong institutional ownership and consistent outperformance against the Sensex benchmark. The technical outlook has improved, with key indicators turning mildly bullish, suggesting a favourable price momentum in the near term. While some short-term caution remains, the overall picture is one of a fundamentally sound and technically supported investment opportunity.

Investors seeking exposure to the Garments & Apparels sector would do well to consider Arvind Ltd as a Buy, given its demonstrated ability to deliver growth and value in a competitive industry environment.

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