Karur Vysya Bank And Vardhman Textiles: Weekly Recommendations

The two stocks recommended by SMC Global Securities’ Research Team this week are Karur Vysya Bank and Vardhman Textiles. These two stocks have shown great potential with positive financial estimates for the next two financial years. So, let’s go through the details of the two stock recommendations by SMC for the period between April 7, 2025 and April 11, 2025.

Karur Vysya Bank Limited

Karur Vysya Bank share price is ₹217.05 (as on April 4, 2025) and its target price is set at ₹248 with an upside potential of 14%.

Karur Vysya Bank Limited: Investment Rationale

• The business of the bank has increased 15% YoY to ₹1,81,993 crores end December 2024, driven by a 14% surge in advances to ₹82,838 crores. Deposits increased 16% to ₹99,155 crores at end December 2024.
• Advances growth was driven by retail loans rising 20% YoY to ₹20,476 crores at end December 2024, while credit to agriculture increased 17% to ₹19,705 crores and MSME 22% to ₹29,824 crores at end December 2024. The corporate credit has declined 11% to ₹12,833 crores end December 2024.
• Net interest income (NII) increased 8% to ₹1,079 crores in Q3 FY25 as against ₹1,001 crores recorded in Q3 FY24. The bank has shown a 41 bps YoY jump in the cost of deposits to 5.66%, while yield on advances was flat at 10.16% in Q3 FY2025. Thus, the NIM has declined 29 bps YoY and 8 bps QoQ to 4.03% in Q3 FY2025. The bank expects NIM to be around 3.85% in Q4 FY2025.

• The bank has exhibited healthy improvement in the asset quality in Q3 FY2025. The GNPA ratio declined to 0.83% as of 31 December 2024 as against 1.58% as of 31 December 2023. The net NPA ratio stood at 0.20% as of 31 December 2024, compared to 0.42% as of 31 December 2023. Provision coverage ratio was at 96.87% as on 31 December 2024, up 206 basis points YoY.
• The CASA deposits of the bank increased 4% YoY to ₹28,167 crores at end December 2024. The current account deposits increased 4% to ₹8,828 crores, while saving account deposits moved up 5% to ₹19,339 crores end December 2024. The CASA ratio eased to 28.4% at end December 2024 compared to 31.5% at end December 2023, while declined from 29.5% a quarter ago.
• The bank showed a 2% decline in provisions to ₹147.44 crores. The loan loss provisions declined 7% to ₹100 crores, while there was a write-back of investment provisions of ₹4 crores. The capital adequacy ratio of the bank stood at 15.03% with Tier I ratio at 15.39% at end Sep 2024.
• Return on assets (ROA) and return on equity (ROE) for Q3 FY25 were at 1.74% and 17.42%, respectively and the management of the bank aims to maintain a RoA above 1.65%. The bank has added 25 branches in Q3 FY25 and expects to add 22 branches in Q4 FY2025.

Karur Vysya Bank Limited: Shareholding Pattern

Public (and others) shareholding is highest in Karur Vysya Bank at 41.11%.

Karur Vysya Bank Limited: Valuation

The bank reported another strong performance in Q3 FY2025, in line with its guidance. This steady and consistent growth reflects the bank’s solid financial health. For FY2025, the bank is on track to meet its loan growth target of 14%.

Management remains focused on maintaining a return on assets above 1.65% and reducing the cost of funds. The bank’s business growth aligns with industry trends, with each segment demonstrating positive performance.

Thus, it is expected that the stock may see a price target of ₹248 in 8 to 10 months’ time frame on 2 year’s average P/Bvx of 1.47x and FY26 BVPS of ₹169.

Karur Vysya Bank Limited: Risk

• Slowdown in domestic and international demand for end-markets
• Regulatory norms

Vardhman Textiles Limited

Vardhman Textiles share price is ₹471.40 (as on April 4, 2025) and its target price is set at ₹539 with an upside potential of 14%.

Vardhman Textiles Limited: Investment Rationale

• The Vardhman group is one of the leading textile groups in India, with operations across the yarn, fabric, sewing threads, fibre, special alloys, and garment sectors.
• It has geographical diversification across domestic and export markets, product diversification across value-added yarns and fabrics, multiple plant locations, and technical collaborations.
• The company is incurring huge capex of ₹2,800 crores aimed at enhancing its manufacturing capabilities and sustainability. Its ongoing project of ₹1,000 crores for spinning capacity expansion and modernization is expected to get completed by May 2025 adding 56,744 equivalent spindles (6,624 rotors and 17,000 ring spindles). It is investing ₹320-330 crores for a technical textiles facility targeting 1.5 million meters monthly capacity by end-2025.

• To meet rising demand for high-quality processed fabrics in domestic and export markets, the company plans to invest ₹350 crores at its Vardhman Fabrics facility in Budhni, Madhya Pradesh. Post expansion it will increase the capacity from 175 million meters to 206 million meters annually. The project is expected to be completed within two years.
• To boost ESG compliance, it is investing ₹500 crores for biomass-based boilers and additional investments in solar and wind power to raise green energy usage from 2.5-3% to 25-30%
• The discounted reciprocal tariff on Indian imports to US as compared to China, Vietnam, and Bangladesh would benefit the company especially as Bangladesh faces political turmoil, diverting orders to India. This is in addition to support by government initiatives to enhance productivity and sustainability.
• Net sales (including other operating income) have increased 5.83% to ₹2,465.3 crores. Sales of Fibre segment has gone up 32.14% to ₹81.78 сrоrеs (accounting for 3.29% of total sales). Sales of the textiles segment has gone up 5.03% to ₹2,403.94 crores (accounting for 96.71% of total sales).
• Operating profit margin has jumped from 10.48% to 12.69%, leading to a 28.07% rise in operating profit to ₹312.75 crores. Net profit increased 31.44% to ₹210.61 crores. According to the management, both spinning business and fabric businesses are doing good, terms of the customer base, product base and utilization.

Vardhman Textiles Limited: Shareholding Pattern

In the overall shareholding of Vardhman Textiles, promoters have the highest shareholding at 64.21%.

Vardhman Textiles Limited: Valuation

The ambitious expansion and modernization plan is scheduled to be completed within the next 2 years. By augmenting its operational capacity and adopting modern technologies, Vardhman anticipates achieving better business synergies and gaining a competitive advantage in the market.

Additionally, the modernization efforts are poised to enhance productivity across business operations, enabling the company to meet the growing demand effectively.

Thus, it is expected that the stock will see a price target of ₹539 in 8 to 10 months’ time frame on a 1-year’s average P/BV of 1.48x and FY26 BVPS of ₹364.

Vardhman Textiles Limited: Risk

• Raw material risk
• Forex risks

Conclusion

These two stocks, one from the banking sector and other from the textile sector can reach their target price in the coming 8 to 10 months. However, it is always better if you do your analysis before investing and set a stop-loss target. To keep track of your invested stocks, open demat account with SMC Global Securities and invest on the go.

Reference:
https://www.smctradeonline.com/research/wise-money/241

Author: All Content is verified by SMC Global Securities.