Nitin Spinners has given 460 percent return to investors in the past one year and has soared 263 percent so far this year. The bull run in the multi-bagger stock is not yet over, suggest experts while adding that investors could double their money in a year.
“This stock has the potential to almost double over a year,” said Kkunal Parar, Vice-President, Research, Choice Broking.
What do technical charts indicate?
The stock faces strong resistance near its all-time high level of 295 and despite facing selling pressure near this level the selling volumes remained low indicating the prevailing interest, said Arpan Shah, Senior Research Analyst at Monarch Networth Capital.
Looking at the current momentum, the stock is likely to see a small dip from the current level, which will be a good buying opportunity between 230-240 zone for an upside target of 300-350, added Shah.
In fact, Parar believes the stock has the potential to rally up to Rs 400-500 level once it takes out the all-time high.
The stellar run in the stock comes on the back of the company’s excellent earnings in the past few quarters and a strong demand outlook.
Financials of Nitin Spinners
The Rajasthan-based company’s net profit more than doubled to Rs 87.4 crore in July-September from Rs 42.9 crore in January-March.
From a revenue of Rs 511.6 crore in the March quarter, Nitin Spinners managed to clock Rs 664.7 crore worth of revenue in the September quarter.
Strong volume and realisation growth led the company to post a 20 percent Quarter-on-Quarter growth in sales for Q2 FY22.
On a year-on-year basis, the company's realisation was 60 percent higher in the yarn business and 63.5 percent higher in the knitted fabric business, as the company was able to pass on higher raw material prices, analysts said.
What does the company do?
The company manufactures cotton and blended yarn, grey knitted fabrics and finished and printed woven fabrics. It was established in 1992 and headquartered in Bhilwara, Rajasthan.
Nitin Spinners’ first plant is located in Bhilwara, and the second is situated at Begun in Rajasthan. The plants are connected to all major cities of India, with proximity to raw material sources and accessibility to modern shipping ports.
The company exported more than 70 percent of its production to over 50 countries across the globe during the first half of FY22.
Should you buy the stock?
With the second wave subsiding, demand is picking up in the domestic market and export demand is already strong, which implies that the overall demand environment is likely to remain good in the coming quarters.
Nitin Spinners will do very well in the coming quarters as well given the robust outlook for yarn business, and if one wants to invest in the textile sector then this multi-bagger should certainly be a part of one’s portfolio, said Rohan Mehta, Chief Executive Officer and Fund Manager, Turtle Wealth.
“The company is available at a good valuation and its risk-reward ratio is also favourable as compared to peers,” Mehta added.
Analysts believe that the China+1 strategy will drive gradual market share gains for the yarn maker.
The company had said in its recent investor presentation that it will continue to explore newer markets across the geographies to take advantage of the China+1 strategy of major consuming countries.
“Strong demand outlook with higher prices of yarn, which constitutes a major chunk of the company’s revenue, exposure to all major yarn consuming countries, apparel manufacturers slowly shifting to domestic yarn players, and scope for a higher P/E multiple augur well for Nitin Spinners,” said Awanish Chandra, Head-Institutional Equities, SMIFS.
Another advantage is that the company’s earnings per share have increased from Rs 7.6 in the March quarter to Rs 15.5 in the September quarter.
Interestingly, Foreign Portfolio Investors (FPIs) and marquee investor Dolly Khanna have lapped up this multi-bagger during the past few months. This is reflective of the increasing investor confidence in the company’s business prospects.
According to the shareholding pattern, FPIs shareholding as of March-end was nil but as of September-end, they owned 2.7 percent stake in Nitin Spinners.
Similarly, Khanna bought the company's shares representing 1.64 percent stake, according to the shareholding pattern as of September-end. Khanna's stakeholding as of March-end was zero, shareholding data showed.
Key risks
On the flip side, like the American businessman and investor, Millard Drexler, rightly put, “You can't run a business without taking risks”.
Even as the outlook appears strong and bright, there are some risks to Nitin Spinners’ performance going ahead.
Volatility in cotton prices is always a risk for cotton spinners, but recently Nitin Spinners has successfully passed on higher raw material prices to end consumers, Chandra pointed out.
Till demand is strong, the company can maintain its super margin performance and then it can normalise a bit in a long run, Chandra quickly added.
Today, the scrip ended at Rs 253 on the BSE and at Rs 252.80 on the NSE.
(Edited by : Ajay Vaishnav)
First Published: Nov 12, 2021 3:46 PM IST
