Best Apparel Stocks in India

India’s apparel sector has witnessed significant growth, driven by rising consumer demand and expanding market reach. As investors seek the best stocks in this sector, an in-depth analysis of financial metrics is essential. This article evaluates key apparel stocks in India, focusing on Price to Earnings (PE) ratios, growth metrics, margins, cash flows, and return ratios.

PE and PB Ratio Analysis

A comparison of the current Price to Earnings (PE) ratios with the historical 3-year PE averages reveals potential undervaluation. Stocks with a current PE below their historical average may be considered undervalued, suggesting mean reversion to historical PE could be on the cards. From the table, Sai Silks, S P Apparels, and Vedant Fashions exhibit current PEs lower than their historical averages, indicating potential undervaluation. Conversely, Arvind Ltd shows a significant deviation, suggesting mean reversion might occur.

The Price to Book (PB) ratio offers insights into how the market values a company’s assets. A lower PB ratio typically indicates undervaluation. For instance, Rupa & Co with a PB ratio of 2.33 and S P Apparels with 2.66 suggest these companies are valued closer to their book value, whereas Vedant Fashions at 15.9 indicates a premium valuation.

Sales and Profit Growth

Evaluating sales and profit growth over the past three years provides insights into company performance and market position.

Arvind Ltd stands out with a remarkable profit growth of 283.62%, while Sai Silks shows an impressive profit growth of 169.73%. Kewal Kiran Clothing Ltd. and Vedant Fashions also exhibit strong sales and profit growth.

Margins, Cash Flow, and Net Block Growth

Analysing margins, cash flow, and net block growth provides a comprehensive view of financial health and operational efficiency.

Dollar Industries leads with the highest operating profit margin (OPM) and net profit margin (NPM) growth at 38.71% and 38.70%, respectively followed by Rupa & Co. However, its cash flow growth is negative. Kewal Kiran Clothing Ltd. shows a strong cash flow growth of 81%, suggesting efficient cash management.

Return Ratios

Return ratios such as Return on Capital Employed (ROCE), Return on Equity (ROE), and Return on Assets (ROA) are critical for assessing financial performance and efficiency.

Vedant Fashions tops the charts with the highest ROCE at 31.71%, followed closely by Kewal Kiran Clothing Ltd. at 31.16%. This indicates that these companies are effectively utilising their capital.

Conclusion

Combining all the analyses, Vedant Fashions takes the top spot due to its overall strong performance across multiple financial metrics. Kewal Kiran Clothing Ltd. follows closely with solid growth and return ratios. Arvind Ltd and Sai Silks are also strong performers, especially in profit growth. Dollar Industries, despite strong margin growth, faces challenges in cash flow. Arvind Fashions, S P Apparels, and Rupa & Co complete the ranking, with room for improvement in certain areas.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.