Govt has again extended the import duty exemption in this years’ budget; Govt is in parallel trying to incentivize local production of Extra Long Staple Cotton Fibre used in making premium cotton textiles https://epaper.thehindubusinessline.com/ccidist-ws/bl/bl_mumbai/issues/169731/OPS/GP8FI3GET.1.png?cropFromPage=true
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The company has finally posted excellent results after testing the patience of the investors for a very long time.
The company has posted a EPS of 42.85 per share and a dividend of Rs.37.
The result was after the MTM loss it posted.
As mentioned in my previous post, the company’s margins to a very large extend depends on the cotton cycle due to the very large inventory it holds.
The cotton prices has seen an uptick mainly due to the geopolitical issues, which caused increasing crude prices. Polyester prices may have increased with the crude oil price shock, giving a natural push to cotton prices.
As per Dollar industry’s concall, the industry has taken a price hike after almost 2 years due to increase in cotton and yarn prices.
The increase in cotton prices should definitely benefit Ambika due to its large inventory. The benefit was expected to be for a short-term, tracking global geopolitical uncertainty. However, USDA’s latest report on cotton is an interesting read.
Source: https://apps.fas.usda.gov/psdonline/circulars/cotton.pdf
It could mean we are at the beginning of a cotton upcycle.
Ambika also did a recent expansion
Inventories have reduced slightly after a long time
Discl: Invested and biased. Has bought shares in the last 30 days.
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The recent expansion of 12,528 spindles will take the total spindle capacity to 1,20,186 spindles from 1,08,288
In percentage terms it is 11.50%
The spindle capacity of 1,08,288 has been stagnant for over 12 years
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