Textile stock to buy now for an upside of 52%; Recommended by Motilal Oswal

Synopsis:- Brokerage maintained a ‘Buy’ with Rs 650 target, implying 52% upside from Rs 428.60. Strong traction seen in USPA with PAT rising to Rs 996 million, while direct channels grew 30–50%. Operating profit improved to Rs 195 crore with stable 13–14% margins, supporting long-term growth visibility.

India’s specialty retail sector is riding a strong consumption‑led upcycle, with the overall retail market estimated at around USD 1.1–1.2 trillion by 2026 and organized retail contributing roughly 15–17 percent of total sales. Fueled by rising disposable incomes, deeper penetration in tier‑II and III cities, and faster omnichannel adoption, specialty retail is seeing double‑digit growth in discretionary categories such as apparel, lifestyle, and experiential formats.

With a market capitalization of Rs 6,090.20 crore, the shares of Arvind Fashions Ltd were trading at Rs 455.75 per share, increasing around 6.33 percent as compared to the previous closing price of Rs 428.60 apiece.

Brokerage Recommendation

Motilal Oswal has maintained a positive outlook on the stock, assigning a ‘Buy’ rating with a target price of Rs 650. This implies a potential upside of 52% from the previous closing price of Rs 428.60, reflecting confidence in the company’s growth prospects, improving fundamentals, and earnings visibility going forward.

As per the brokerage, USPA’s profitability is showing a clear inflection, with 9MFY26 PAT rising sharply to ~Rs 996 million from ~Rs 59 million YoY. Growth is driven by better sell-through, strong traction in adjacencies, and online scale-up. While standalone numbers appear weak, this reflects restructuring impacts rather than operational deterioration, with losses now being reclassified.

The company’s direct channel strategy is gaining momentum, supported by ~8% retail LTL growth and robust 30–50% expansion in online B2C. Improved mix has reduced discounting and lifted gross margins, though EBITDA gains remain modest due to higher brand investments. Strong inventory discipline and freshness are enabling better full-price sales and improving overall margin quality sustainably.

Adjacency categories are emerging as a strong second growth engine, contributing over 20% of revenue and growing faster than core apparel. Segments like footwear, innerwear, womenswear, and kids are scaling rapidly, supported by distribution expansion. This strategy enhances sales density within existing stores while maintaining profitability, ensuring growth without compromising margin structure.

Financial Performance

The company reported moderate revenue growth of 14% from Rs 1,203 crore to Rs 1,377 crore in Q3FY26, indicating steady demand. However, profit declined 23% from Rs 47 crore to Rs 36 crore, suggesting margin pressure. This divergence points to rising costs or operational challenges impacting overall profitability despite top-line improvement.

From Dec 2024 to Dec 2025, operating performance showed gradual improvement. Operating profit increased from Rs 166 crore in Dec 2024 to Rs 195 crore in Dec 2025, reflecting better business traction. Meanwhile, OPM remained stable in the 13–14% range, indicating consistent margin management and steady operational efficiency despite fluctuations across intermediate quarters.

Arvind Fashions is a leading Indian apparel and lifestyle company, managing a portfolio of popular international and domestic brands. With a strong retail and online presence, it focuses on premium and casual wear segments, leveraging brand strength, distribution reach, and evolving consumer trends to drive growth.

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