The Hindu Business Line : Textile stocks on the rise on Q2 hopes

Indian textiles have turned out to be one of the major beneficiaries of US restrictions on Chinese textile exports during the first six months of the current year. The country's exports to the US rose by over 18 per cent year-on-year, while Chinese textile exports to the US in the first six months of 2006 have dropped by 0.6 per cent from that in 2005.

"One factor for the rise in exports is the cap placed on textile exports from China. Also Indian manufacturers have gained more in the value-added segment," said Ms Priya Ayyer, textile analyst, IDBI Capital Market Services Ltd.

Capacity expansions

"Companies are doing well because a number of them have undertaken capacity expansions. There is a steady demand and companies have realised that it will go up further," said a textile analyst.

The second quarter results are expected to be good in terms of volumes. "The second quarter could be the best for most textile companies with the festive season leading to heavy bookings," said Ms Neha Bubna, textile analyst, UTI Securities

Price surge

Analysts also attribute the surge in textile stock prices to individual performances by some companies.

While S. Kumars and Kewal Kiran Clothing Ltd are doing well, Alok Industries is in the limelight as it is expanding capacity.

"A few months ago, textile stocks were underperforming the market, but now valuations are looking much better," said a textile analyst.

According to analysts, Raymond, Kewal Kiran Clothing Ltd and Alok Industries are some of the companies whose stocks are looking attractive.

The stock of Kewal Kiran Clothing has gained 22.55 per cent month-on-month at Rs 234.50, while Alok Industries stock gained 12.32 per cent month-on-month at Rs 72

"There are many reasons for our profitability," said Mr Nikesh Jain, Chief Financial Officer, Kewal Kiran Clothing Ltd. "We are one of the only listed entities that are into a purely brand based business. And we have four brands operating in different design and brand segments."