Elara sees 64% upside potential in this smallcap textile stock; explains bullish rationale
The domestic brokerage said the smallcap firm's Q2 FY26 performance was in line with estimates on revenue and EBITDA, while PAT outperformed due to higher other income and lower interest costs.
- Nov 10, 2025,
- Updated Nov 10, 2025 3:36 PM IST
Elara Capital has retained its 'Buy' rating on Arvind Ltd, projecting a 64 per cent upside potential from the calculated market price of Rs 328, with a target price of Rs 538. The domestic brokerage said the smallcap firm's Q2 FY26 performance was in line with estimates on revenue and EBITDA, while PAT outperformed due to higher other income and lower interest costs.
The Advanced Material Division (AMD) outperformed expectations, while the textiles business was broadly in line. Elara expects H2 FY26 to be stronger, supported by better volumes, renegotiated vendor contracts and new order inflows in the AMD segment from the US. The brokerage has slightly reduced its earnings estimates by 3.1 per cent for FY27E and 2.9 per cent for FY28E, while rolling over its valuation to FY28E.
According to Elara, EBITDA margin expanded 32 basis points (bps) YoY to 10.4 per cent, driven by a 28 bps gross margin gain and a 221 bps decline in other expenses, partially offset by higher employee costs.
The margin improvement was supported by cost control initiatives such as supplier discounts, administrative expense cuts, hiring freeze and energy conservation. Elara expects margins to moderate by 86 bps in FY26E to 9.4 per cent due to higher discounts for the US market amid tariff impact.
However, margins are projected to recover to 11.7 per cent by FY28E as the company gains market share in the US, UK and other geographies.
Arvind incurred Rs 220 crore in capex during H1 FY26 and has revised its full-year target to around Rs 450 crore, evenly split between the garment and AMD segments. The AMD unit is expected to expand capacity by 20 per cent each in FY26 and FY27, while the garment division's capacity is projected to rise to 5.5 crore pieces by FY27 from 4.8 crore currently.
Elara remains positive on Arvind's long-term outlook, expecting ongoing investments in garments and AMD to drive growth, margin expansion and improved ROCE. The brokerage forecasts an EBITDA CAGR of 16.7 per cent and PAT CAGR of 21.9 per cent over FY25–28E, alongside a free cash flow of Rs 960 crore in the same period.
Elara Capital has retained its 'Buy' rating on Arvind Ltd, projecting a 64 per cent upside potential from the calculated market price of Rs 328, with a target price of Rs 538. The domestic brokerage said the smallcap firm's Q2 FY26 performance was in line with estimates on revenue and EBITDA, while PAT outperformed due to higher other income and lower interest costs.
The Advanced Material Division (AMD) outperformed expectations, while the textiles business was broadly in line. Elara expects H2 FY26 to be stronger, supported by better volumes, renegotiated vendor contracts and new order inflows in the AMD segment from the US. The brokerage has slightly reduced its earnings estimates by 3.1 per cent for FY27E and 2.9 per cent for FY28E, while rolling over its valuation to FY28E.
According to Elara, EBITDA margin expanded 32 basis points (bps) YoY to 10.4 per cent, driven by a 28 bps gross margin gain and a 221 bps decline in other expenses, partially offset by higher employee costs.
The margin improvement was supported by cost control initiatives such as supplier discounts, administrative expense cuts, hiring freeze and energy conservation. Elara expects margins to moderate by 86 bps in FY26E to 9.4 per cent due to higher discounts for the US market amid tariff impact.
However, margins are projected to recover to 11.7 per cent by FY28E as the company gains market share in the US, UK and other geographies.
Arvind incurred Rs 220 crore in capex during H1 FY26 and has revised its full-year target to around Rs 450 crore, evenly split between the garment and AMD segments. The AMD unit is expected to expand capacity by 20 per cent each in FY26 and FY27, while the garment division's capacity is projected to rise to 5.5 crore pieces by FY27 from 4.8 crore currently.
Elara remains positive on Arvind's long-term outlook, expecting ongoing investments in garments and AMD to drive growth, margin expansion and improved ROCE. The brokerage forecasts an EBITDA CAGR of 16.7 per cent and PAT CAGR of 21.9 per cent over FY25–28E, alongside a free cash flow of Rs 960 crore in the same period.