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AMD and Garment businesses to drive growth

Arvind (ARVND) revenue grew 24.7% YoY to INR25.0b in 1QFY27. Textile revenue grew 13% to INR17.3b on strong volumes, while Advanced Materials delivered record revenue of INR6.5b/EBITDA of INR1b. Demand remains robust across both businesses with healthy order books. Gross margin contracted 140bp YoY to 51.5%, while EBITDA margin settled at 9.6% (+80bp YoY). Margins were impacted by sharp cotton/yarn and petrochemical cost inflation, with ~100bp+ pressure in textiles. Price pass-through is expected to drive recovery, with garments targeting double-digit margins over 18-24 months and advanced materials targeting margins over 16%. We expect the AMD business to expand at ~17%+ CAGR over the next two years (ex-Dalco), while the Garments business is expected to expand at ~15% CAGR

Strong volume momentum in denim, followed by garmenting

ARVND delivered a strong 1Q with consolidated revenue/EBITDA growth of 25%/36% YoY to INR25.0b/INR2.4b, while APAT grew 28% to INR680m. Textile revenue grew 13% on strong volumes, with denim volumes rising 35% to 17.5m meters and healthy order visibility. Advanced Materials reported record revenue/EBITDA of INR6.5b/INR1.0b, supported by strong defense, composites, mobility, and renewables demand. The company invested INR1b in capex during 1Q, while further capacity additions and asset-light partnerships are expected to support growth. Management remains confident of achieving 18-20% mediumterm growth in advanced materials, led by capacity expansion and strong endmarket demand. Going forward, management expects 15% CAGR on garmenting over the next 2-3 years, with margin expansion of 250-300bp.

Margin expansion in garmenting, while RM pressure continues

In 1Q, gross margin contracted 140bp YoY to 51.5%, impacted by sharp inflation in cotton/yarn and petrochemical costs. Despite the cost pressure, EBITDA grew 35.5% YoY to INR2.4b, with EBITDA margin at 9.6% (+80bp YoY). Price passthrough is expected to further support margin recovery going forward. Garment margin remained in high single digits, with double-digit margin targeted over 18- 24 months as new capacities mature. We expect gross margin to expand to ~52%, led by an improving product mix, and EBITDA margin to expand to 11.4% (+60 bp), led by improving operating leverage.

Valuation and view: Reiterate BUY

We believe ARVND is on the verge of a strategic transformation from a fabricfocused player to a garments-led business, which offers a larger addressable market. Additionally, the AMD segment, which comprises a high-value segment, is expected to support with its superior margin profile and strong growth potential. The recent INR5b QIP proceeds will be utilized to reduce India debt related to the Dalco acquisition. Management expects 11-12% revenue growth, with a 40-60bp operating margin expansion over the next 2-3 years. We have tweaked our earnings and reiterate our BUY rating and an EV/EBITDA-based TP of INR670, valuing the stock at 12x FY28E EV/EBITDA. Key risks: tariff risk, raw material and cost pressures, and project and execution risks related to the Dalco business (refer to our IC note dated Jun’26).

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