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Why Anand Rathi is bullish on multibagger stock that has rallied over 105% in 6 months

Lux Industries shares have surged over 130% this year (iStock) — Lux Industries shares have surged over 130% this year **(iStock)**

1 min read . Updated: 03 Nov 2021, 02:28 PM IST Livemint

The brokerage firm has upgraded its rating on the multibagger stock to a Buy with a higher target price

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Shares of Lux Industries have multibagger return this year (year-to-date or YTD) so far with the stock surging over 131% in 2021. The multibagger stock has surged over 105% in six months period alone. Brokerage firm Anand Rathi sees further upside on the stock.

Lux’s Q2 FY22 surpassed Anand Rathi's estimates as net profit and revenue registered growth of 50% and 25% year-on-year (YoY). Though, due to the seasonal nature of the business H1FY22 working capital was higher (160 days), which is expected to be reduced by the year end.

“On its profitable growth trajectory, we are upbeat about Lux’s long-term growth prospects because of its strong brand equity, launches and long-standing operations in innerwear. With H1FY22 beating our estimates, we raise our FY22e/FY23e revenue 2%/3% and EPS 5%/6%," Anand Rathi's note stated.

The brokerage has upgraded its rating on Lux Industries to a Buy with a higher target price of ₹5,322. However, it sees slower growth in its premium range, keen competition and rise in raw-material prices as key risks.

The increase in inventory stemmed from the higher cost of raw materials and stocking winter products, while debtors were more due to liquidity constraints in the market, as per Anand Rathi. Management expects working capital to be maintained at FY21 levels by end- FY22.

“To counter the higher raw material prices, the company has hiked its selling price 10-11% in the last 11-12 months, with further price hikes likely in Q3 FY22. Prices will rise further in Q4 on the increase in GST rates," the note added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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