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Why Axita Cotton Share Price is Falling

May 5, 2023

Why Axita Cotton Share Price is Falling

Axita Cotton's shares experienced a sharp decline, falling for the sixth consecutive session on 5 May 2023. Over the past five days, the stock has plummeted by 54%.

The sudden and significant decline has come as a surprise to investors, as Axita Cotton stood among the top multibagger penny stocks in India.

From 27 April 2022 to 27 April 2023, this textile stock logged a multibagger return of 490%. This impressive performance was due to multi-million-dollar export orders from Bangladesh for cotton exports.

As the textile giant's shares have hit a snag, let's find out the reasons behind this decline.

Poor Q4 result

For the March 2023 quarter, Axita Cotton reported a 56% YoY decline in revenue to Rs 1.3 (billion) bn, against a revenue of Rs 2.9 bn a year back.

This was due to tepid demand for textiles. Domestic sales were sluggish due to cheap imported garments while spending cuts from the big markets like US and Europe impacted sales.

The net profit for the quarter also came lower by 11.4% YoY to Rs 56 million (bn) due to elevated raw material prices and lower export demand.

On the operating front, EBITDA (earnings before interest, taxes, depreciation and amortisation) fell 17.2% YoY to Rs 77.2 m from Rs 93.2m a year back.

This downfall was due to the huge inventory with international buyers and subdued capacity utilisation.

Following the disappointing quarterly result, the shares of Axita Cotton tanked 21% in a day.

What next?

Axita Cotton has recently received orders for Indian raw cotton worth Rs 222 m from several Bangladeshi spinning mills.

The order comprises four international buyers and will be shipped to the country over the next three months.

On 6 April 2023, the company also bagged an order of Rs 269.2 bn.

As a result, the company's order book, as of 6 April 2023, stood at Rs 492 m. This is expected to aid sales in the coming quarters.

Additionally, lowering the premium of domestic cotton over international cotton prices could further boost the company's performance.

Also, the government's aim to increase the size of the textile industry to Rs 40 trillion (tn) (US$ 300 bn) by 2030 from Rs 8 tn (US$ 100 bn) in 2022 is expected to help Indian textile companies, including Axita Cotton, to compete better in global trade.

The measures, such as the 100% FDI through automatic route PLI scheme to encourage investments in man-made fibres (MMF) and PM Mitra Parks for capacity expansion, are expected to help textile companies.

How Axita Cotton shares have performed recently

Axita Cotton shares have declined by more than 37% in a month. Over the past week, the company's shares are trading lower by 54%.

Axita Cotton touched its 52-week high of Rs 83 on 28 April 2023 while it touched a 52-week low of Rs 17 on 21 June 2022.

chart

About Axita Cotton

Axita Cotton is an Indian textile company that specializes in the manufacturing and exporting of cotton yarn and fabrics.

The company operates through two business segments: textile and trading. The textile segment involves the manufacturing and sale of cotton yarn and fabrics, while the trading segment deals with the trading of textiles and other related products.

The company's product portfolio includes a range of cotton yarns such as combed cotton yarn, carded cotton yarn, organic cotton yarn, and compact cotton yarn.

Additionally, Axita Cotton also produces a variety of fabrics including shirting fabrics, suiting fabrics, and home textiles.

The company has a global presence and exports its products to more than 30 countries, including the United States, Canada, Europe, and Asia.

For more details, see the Axita Cotton company fact sheet and quarterly results.

You can also compare Axita Ctton with its peers.

Axita Cotton Vs Arvind

Axita Cotton Vs Bombay Dyeing

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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FAQs

Which are the top textile companies in India?

Based on marketcap, these are the top textile companies in India:

You can see the full list of the textile stocks here.

What are the top gainers and top losers within the textile sector today?

Within the Textiles sector, the top gainers were WIRES & FABRIKS (up 20.0%) and WINSOME TEXTILE (up 11.5%). On the other hand, GLOBE TEXTILES (INDIA) (down 14.9%) and MISH DESIGNS (down 5.6%) were among the top losers.

You can also take a look at the most active stocks from the textile sector and also check out our textile sector report.

How should you value textile companies?

Investing in stocks requires careful analysis of financial data to find out a company's true worth. However, an easier way to find out about a company's performance is to look at its financial ratios.

Two commonly used financial ratios used in the valuation of stocks are -

Price to Earnings Ratio (P/E)- It compares the company's stock price with its earnings per share. The higher the P/E ratio, the more expensive the stock.

Price to Book Value Ratio (P/BV) - It compares a firm's market capitalization to its book value. A high P/BV indicates markets believe the company's assets to be undervalued and vice versa.

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