Target: ₹538
CMP: ₹329.15
Arvind reported revenue and EBITDA for Q2 FY26 that aligned with expectations, while its profit after tax (PAT) exceeded forecasts due to increased other income and reduced interest expenses. The advanced materials division (AMD) outperformed predictions, whereas the textiles segment met anticipated results. Looking ahead, the company is poised for stronger performance in the second half of FY26, driven by improved volume, renegotiated vendor contracts, and order inflows in the AMD sector from the US.
Estimates for earnings have been reduced by 3.1% for FY27E and 2.9% for FY28E, reflecting adjustments to the current market conditions. Nevertheless, long-term prospects remain positive. Investment in the garments and AMD divisions is expected to spur growth and enhance margins and return on capital employed (ROCE), supported by attractive export opportunities due to free trade agreements (FTAs) with key countries and a robust domestic market. An EBITDA compound annual growth rate (CAGR) of 16.7% and a PAT CAGR of 21.9% are projected for the period from FY25 to FY28.
Additionally, Arvind is anticipated to generate free cash flow of ₹960 crore during FY25-28E. The sum-of-the-parts target price (SOTP-TP) has been increased to ₹538 from ₹471, maintaining a 10x FY28 EV/EBITDA multiple for the textiles segment and a 15x FY28 EV/EBITDA for the AMD unit, based on revised earnings estimates for FY26-28E.
Key risks that may impact performance include potential demand slowdowns, the ongoing US tariff situation, and significant volatility in input costs.
Published on November 10, 2025
