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Arvind Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Arvind Ltd (ARVIND) Q2 FY24 Earnings Concall

  • Financial Performance
    • Revenues up 4% sequentially to INR1,922 crores.
    • EBITDA at INR206 crores, 10.7% margin.
    • Volumes improved in exports and garments but still subdued.
    • Textiles segment revenue grew 3% to INR1,455 crores, 11% margin.
    • AMD revenue grew 13% with 20% plus volume growth.
  • Outlook
    • Expects significant textile volume growth from Q4, driven by China+1, sustainability demands.
    • AMD to continue 20% plus growth trajectory.
    • Aiming for uptick in government vertical volumes in H2.
    • Continuing debt reduction, repaid INR49 crores in Q2.
    • Investing in innovation, technology, people to compensate for weak demand.
    • Input prices like cotton range-bound, not expected to see sharp changes.
    • On track with strategic initiatives.
    • Q3 will be better than Q2.
    • Traceability benefits expected from Q4
  • Garment Business Margins
    • Currently in single digits, aiming for high single digits in a few quarters.
    • Scaling up capacity utilization to 100% will improve margins.
    • Automation investments underway to improve throughput.
    • Focused on denim, knits and wovens; anchor customers in each segment.
  • Subsidiary Simplification
    • Reducing subsidiaries to the bare minimum.
    • Will keep progressing subsidiary reduction over next couple of years.
  • Capacity Utilization
    • Denim at 80%, capacity around 60 million.
    • Woven at 80%, capacity around 130 million.
    • Garments around 75%, capacity 40-42 million.
    • AMD operating at high utilization with 20%+ growth.
  • CapEx Spends
    • 600 crores total CapEx over 2 years as guided earlier.
    • About one third allocated to AMD business.
    • AMD having slightly higher patch margins than textiles.
    • More commitments in coming quarters.
  • AMD Margins
    • Current 15% plus margins expected to be maintained in H2.
    • As business scales, aiming for small improvements over next few years.
    • Targeting 100 bps or more margin improvement in medium term.
  • Domestic Demand
    • Muted overall, uptick due to festivals but not robust.
    • Pressure more in mass segments, premium holding up better.
    • Well positioned due to higher exposure to premium segments.
  • Industrial Segment
    • Most segments doing well except conveyor belting.
    • Belting weak due to lower warehouse demand and high inventory.
    • Expects belting recovery in 1-2 quarters.
  • Garments Capacity Expansion and Woven Margins
    • Plan to expand from 40 million units to 60 million units over 3 years.
    • Focus on denim, knits and woven shirts for vertical integration.
    • Woven aiming to improve vertical integration and return on capital.
  • Business Segment Outlook
    • Expect continued growth in garments business with capacity expansion plans of 20 million in next 3 years.
    • Targeting 20% growth in advanced materials business through capacity expansion and new products.
    • Aiming to improve margins in textiles business by 100-150 bps over next 2 years through higher capacity utilization and operational efficiencies.
  • Growth Strategy
    • Focus on driving organic growth in garments, advanced materials and textiles businesses.
    • Look for inorganic growth opportunities to accelerate expansion.
    • Targeting revenue growth of 7-8% in textiles and 20% in advanced materials going forward.
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