From Rs 37 to Rs 440 in four years, brokerage see more upside in the multibagger stock

Brokerage firms continue to remain positive on Nitin Spinners Ltd, a smallcap Mutlibagger company after its results for the June 30, 2024. Analysts tracking the counter expect it to scale 530 mark in the coming on the back of strong financial performance and margin expansion.

Nitin Spinners reported a net profit of Rs 42.1 crore in the June 2024 quarter, which was up 47.5 per cent on a year-on-year (YoY) basis. The company's revenue came in at Rs 803 crore for the first quarter of the current financial year, rising 30.1 per cent on YoY basis.

Ebitda for the quarter stood 118.8 crore, surging 56.1 per cent YoY, while Ebitda margins expanded 246 basis points (bps) to 14.8 per cent for the April-June 2024 period. Gross margins came in at 37.2 per cent, rising 252 bps YoY, while its cash profit stood at Rs 7.8 crore for the quarter. Exports contributed 64 per cent of revenue in Q1FY25.

Nitin Spinners continued its decent performance in a still subnormal demand environment during Q1FY25. Recent capacity addition led to growth in sales, Ebitda and PAT on yearly basis, said SMIFS. "With cotton prices stabilizing at lower levels, margin improvement continues, but profitability is still below normal levels" it said with a 'buy' rating.

"All new capacity is now on stream with near optimum utilization except for knitted fabric. With cotton prices stabilising at current rates and expectation of further demand recovery and RIPS incentives approval, we believe QoQ performance improvement should continue here on," it said with a target price of Rs 532 on the stock suggesting an upside of 23 per cent.

Shares of Nitin Spinners hit a 52-week high of Rs 447.05 on Thursday, with its total market capitalization hitting Rs 2,500 crore mark. The stock had settled at Rs 432.10 in the previous trading session. The stock has gained nearly 25 per cent in the last two weeks.

Shares of Nitin Spinners rallied more than 1,100 per cent in the last four years as the stock gained to Rs 447 level from Rs 37 in July 2020. It has nearly doubled investors wealth from its 52-week low at Rs 225. The stock is up 35 per cent in the year 2024 so far.

While Q1 was challenging, Nitin maintains an optimistic outlook regarding the company's long‐term growth potential. The completed capacity expansion in weaving and knitting capacities will boost it sales volume, said East India Securities. The structural tailwind for sector remains intact. We are very optimistic on the future growth potential of the sector, it said.

"Nitin Spinners is very well positioned to capture these opportunities. We see NSL very well positioned to capture these growth opportunities as the proposed expansion is very well timed. It is currently trading at a P/E of 10 times on FY26e basis. We have valued the stock based on P/E methodology," the brokerage said with a target price of Rs 502 and a 'buy' rating.

East India Securities, which sees another 16 per cent upside in Nitin Spinners, has cited high volatility in cotton prices could impact volume growth and compression in yarn spread if domestic cotton price increases more than international cotton prices as the key challenges for the company.