Two engines powering the re-rating

Before the narrative, a side-by-side look at the two businesses the bull case rests on — the volume-led textile operation and the higher-margin Advanced Materials division that is fast becoming the company's growth flywheel.

The quarter: record top line, margin still healing

The headline print was emphatic. Consolidated revenue rose 24.7 percent to about Rs 2,500 crore, EBITDA climbed 36 percent to roughly Rs 240 crore, and adjusted profit advanced 27.8 percent to about Rs 68 crore. The one soft spot was gross margin, which contracted 140 basis points to 51.5 percent as cotton, yarn and petrochemical-linked input costs spiked — management flagged more than 100 basis points of war-related inflation in textiles. Crucially, that pressure is a matter of timing rather than structure: orders are booked three to four months ahead at fixed prices, so raw-material inflation passes through with a lag. Even so, operating leverage lifted the consolidated EBITDA margin 80 basis points to 9.6 percent.

Textiles: denim at a 16-quarter high

The legacy business is running hot on volume. Textile revenue grew 13 percent to Rs 1,730 crore, with denim fabric volumes surging 35 percent to a sixteen-quarter high of about 1.75 crore metres. Woven volumes rose 7 percent to roughly 3.12 crore metres and garment volumes climbed 13 percent to more than 1.1 crore pieces. Management credits vertical integration, product innovation and a diversified sourcing footprint spanning India, Bangladesh and Egypt, and points to healthy order visibility through the year-end. The prize is margin mix: as garments — a larger, higher-value market than raw fabric — grow at a mid-teens pace, the brokerage sees consolidated gross margin drifting toward 52 percent.

Advanced Materials: the high-value engine

This is the segment the market is learning to pay up for. Advanced Materials posted record revenue of Rs 650 crore and EBITDA of Rs 100 crore at a 15 percent margin, propelled by human protection and composites, with defence demand normalising and the customer base broadening across para-military applications. Composites are riding mobility, renewable energy and infrastructure, and management targets 18-to-20 percent medium-term growth with margins recovering above 16 percent as pricing catches up with petrochemical costs. Within the acquired Dalco operation, upgrades to two of seven lines should come online over the next three to four months, and an asset-light, leased-capacity model could eventually contribute a fifth of the group at superior returns on capital.

The strategic pivot and a cleaner balance sheet

Earnings trajectory and the valuation case

The forecasts capture a steady climb. Motilal Oswal models revenue rising from Rs 9,300 crore in FY26 to Rs 12,700 crore in FY28, with adjusted profit advancing from Rs 410 crore to Rs 700 crore and the EBITDA margin widening from 10.8 percent to 12.2 percent. Return on equity is seen improving toward 13.2 percent. On those numbers the stock trades at about 21 times FY28 earnings and 10 times forward EV/EBITDA; the brokerage applies a 12-times multiple to FY28 operating profit to derive its Rs 670 objective — a re-rating premised on the mix shift toward garments and materials taking hold.

Risks to weigh