Lux Industries extends rally post March quarter result; gains 63% in 5 days

Analysts at Anand Rathi Share and Stock Brokers retain their 'Buy' rating on Lux Industries with a revised target price of Rs 3,344

Shares of Lux Industries hit a new high of Rs 3,323, soaring 19 per cent on the BSE in intra-day trade on Friday. With today's rally, the stock one of India’s largest hosiery producers and exporters has zoomed 63 per cent in five sessions on the back of robust results for the March quarter (Q4FY21). In comparison, the S&P BSE Sensex was up 1.6 per cent during the period.

Lux Industries' product portfolio includes men’s, women’s and kids' innerwear, winterwear, socks & slacks for women. The company has around 5,000 SKU’s (Stock Keeping Units) under various Brands and Sub Brands of LUX.

The company on Tuesday after market hours had reported a more-than-doubled net profit at Rs 90.64 crore in Q4FY21, on the back of healthy operational income. It had posted profit of Rs 41.49 crore in Q4FY20.

The company's income from operations during the quarter under review jumped 49 per cent year on year (YoY) at Rs 601 crore as against Rs 404 crore in the corresponding quarter of previous fiscal. Ebitda (earnings before interest, taxes, depreciation, and amortisation) margins improved 507 basis points (bps) at 21.45 per cent from 16.38 per cent in the year-ago quarter. Higher Ebitda margins were on account of an increased share of value-added products and overall cost efficiency measures, including advertisement expenditure.

The management said the strong performance has been driven by progressive improvement in demand and consumption across the innerwear industry. The company witnessed healthy traction for economy and mid-premium categories and saw a gradual pickup in premium and export segment.

That said, the management expects the April-June quarter (Q1FY22) to be relatively weak due to the pandemic and expect to improve gradually from the second quarter. "The economic recovery will be back on track in the next few months as the company had witnessed in Q2 and Q3 of FY21," the management said.

Analysts at Anand Rathi Share and Stock Brokers have retained a 'Buy' rating on Lux Industries with a revised target price of Rs 3,344 based on 30x FY23e EPS of Rs 111.

"Driven by greater profitability and better working capital, free cash flow (FCF) jumped around 135 per cent YoY. In the year, market-share gains continued with around 15 per cent market share in organised men’s innerwear. On its profitable growth trajectory, we are upbeat on Lux’s long-term growth prospects for its strong brand equity, launches and long-standing operations in innerwear. Its merger will unlock synergies to further propel growth," the brokerage firm said in result update.

At 12:51 pm, the stock was up 12 per cent at Rs 3,138 on the BSE, as compared to a 0.54 per cent rise in the S&P BSE Sensex. A combined around 723,000 equity shares had changed hands on the NSE and BSE till the time of writing od this report.