Textiles Sector Check - Macro Headwinds To Keep Near-Term Demand Muted For Home Textiles: Motilal Oswal

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Motilal Oswal Report

We have analysed the performance of key textile players in Q1 FY23 and highlighted the key trends in the sector.

• Sluggish demand, destocking, a higher inflationary environment, and supply-chain issues continue to hamper margin.

• Cotton prices touched a record high in Q1 FY23, but have cooled significantly since then. Companies expect prices to stabilise with the onset of the new cotton season in October 2022.

• USDA’s cotton report in August-22 has predicted a global production for the upcoming season at 117 million bales (down by 3.1 million bales from its July 2022 estimate). It has raised its cotton season 2022-23 average farm price forecast to 97 cents per pound in August-22 from 95 cents per pound in July-22.

• The mid to long-term outlook remains intact due to various government initiatives and higher export opportunities with the signing of Free Trade Agreements between India and the UK and a few more in the pipeline.

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