* Sutlej Textiles & Industries Ltd (Sutlej) has reported weak set of numbers for Q4FY20. Its consolidated revenue declined by 13.2% YoY to Rs 536cr. Its EBITDA declined by 66.5% to Rs 14.8cr, while EBITDA margin decreased by 438bps YoY, due to shut down of factories as well as higher employee cost. Further the company’s PAT was too impacted and reported loss of Rs 13.8cr as against profit of Rs 10.5cr in Q4FY19.
* Since last three years, the Indian textile industry had been facing challenges and was not performing well due to implementation of GST, US-China trade war, etc. Now COVID led lockdown has further impacted the businesses. Sutlej managed to perform at a gradual pace from last three years but this unprecedented event too has impacted the company financials. Its debt/equity is still high at around 0.91x which can further impact its balance sheet going forward. Currently, the demand situation too remains uncertain and pickup would only be possible with further opening of economy. We have taken into account COVID impact and would recommend investors to Exit the stock on rise, as there are challenges in term of demand and financials. Thus, we have arrived at the target price of Rs 21.
Buy Sutlej Textiles and Industries Ltd.9-12 Months @ 19 TGT 21 CMP 18.85
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