Nitin Spinners Q4 Results Review - Improvement In Yarn Demand To Aid Revenue Growth: ICICI Direct

ICICI Direct Report

Nitin Spinners Ltd. reported an improvement in operational performance on a sequential basis but macro headwinds continued to impact its performance on a YoY basis.

Revenue grew 22% QoQ to Rs 654.8 crore (down 15% YoY). Gross margins declined 330 basis points QoQ to 29.8% (versus 41% in Q4 FY22) probably owing to high cost cotton inventory and tough demand scenario.

However, positive operating leverage led to lower employee (down 102 bps QoQ) and other expenses (down 194 bps QoQ), which curtailed the decline in Ebitda margins to only 40 bps QoQ to 10.8%. Absolute Ebitda grew 18% QoQ to Rs 71 crore (down 58% YoY)).

Consequently, profit after tax grew 22% QoQ to Rs 38.5 crore (declined 55% YoY).

Key triggers for future price performance:

• Capacity expansion across segments to drive revenue growth. Nitin Spinners’ planned capex of Rs 900 plus crore can generate incremental revenue of ~Rs 1100 crore (peak revenue of Rs 3500 crore).

• We expect Nitin Spinners to generate superior return on capital employed of ~15% in FY25E (versus average RoCE: 10-12%). We model revenue, earnings compound annual growth rate of 15%, 21%, respectively, in FY23-25E.

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