GHCL Textiles Ltd.: overview
Transformation is gathering pace.GHCL Textiles Ltd. (NSE: GHCLTEXTIL | BSE: 543918 | Market Cap: ~Rs. 1,100Cr)delivered a strong quarter, supported by favourable yarn economics, disciplined cotton procurement and increasing contribution from fabrics, reinforcing its structural margin expansion story.
Favourable Yarn Economics Drive Strong Earnings Recovery
Revenue grew 52% YoY to Rs. 410Cr, supported by robust yarn demand, improved realizations and favourable industry conditions, reflecting a broad-based recovery in the textile cycle.
EBITDA stood at Rs. 70Cr, with EBITDA margin expanding to 17% (vs. ~12% in Q1 FY26), driven by higher yarn spreads, disciplined pricing and strategic procurement of lower-cost cotton inventory.
PAT increased to Rs. 39Cr, demonstrating strong operating leverage and the company's ability to translate favourable market conditions into superior earnings growth.
Fabric Mix and Asset Utilisation Continue to Improve Business Quality
Fabric contribution increased to 16% of revenue (vs. 9% in Q1 FY26), reflecting continued progress towards a more diversified product portfolio. Management continues to target 30-40% fabric contribution over the next three years, supporting 200-300 bps structural EBITDA margin expansion.
Captive yarn consumption increased to 11%, highlighting greater internal utilisation as fabric operations continue to scale, while the remaining 89% of production was sold externally.
Operational performance remained robust, with spinning utilisation sustaining 98-99% and the first phase of knitting capacity operating at 80-85% utilisation. Supported by improving asset utilisation, customer mix and downstream integration, ROCE improved to ~12%, with management expecting further improvement going forward.
Disciplined Cotton Procurement Supports Margin Visibility
Cotton inventory has been secured until November-December 2026, providing near-term protection against raw material inflation despite cotton prices increasing from Rs. 62,000/candy in April to Rs. 68,000-70,000/candy in July. (please note that the company also reported a fire incident, resulting in some inventory loss)
Yarn spreads improved to ~Rs.155/kg (vs. Rs.138/kg in Q4 FY26), benefiting from favourable pricing dynamics and lower-cost inventory. Management expects spreads to remain broadly stable during Q2 before gradually normalising as higher-cost inventory is consumed.
The proactive cotton procurement strategy continues to reduce input cost volatility, providing better visibility on near-term margins despite fluctuations in cotton prices.
Strategic Investments Enhance Long-Term Competitiveness
The remaining 25 knitting machines are expected to be commissioned by Q3 FY27, strengthening downstream manufacturing capabilities and supporting higher fabric production.
GHCL has been allotted land at the PM MITRA Park in Tamil Nadu, with commissioning targeted in CY28. The Rs. 350-400Cr project is also expected to benefit from Rs. 100-125Cr of state incentives, improving project economics and long-term capital efficiency.
Renewable energy capacity stands at 65 MW, with an additional 11 MW under implementation. The operational 3 MW rooftop solar plant is expected to deliver ~Rs. 2Cr in annual savings, while the 11 MW ground-mounted project, scheduled for commissioning by December 2026, is expected to add ~Rs. 6Cr annually from FY28, increasing total renewable energy savings to ~Rs. 8Cr per annum.
FY27 capex guidance of Rs. 100-120Cr remains focused on knitting expansion, renewable energy and routine modernisation, supporting future growth while enhancing operating efficiency.
Structural Tailwinds Support Sustainable Growth
Management reiterated its Rs. 2,000Cr revenue target by FY29, while expecting FY27 growth to remain broadly in line with last year's trajectory, supported by fabric expansion and higher value addition.
Q2 yarn spreads are expected to remain broadly stable, while FY27 spreads are projected to remain stronger than FY26, supporting healthy profitability through the year.
Normalised EBITDA margins are guided at 14-15%, with increasing fabric contribution expected to structurally improve margins to 16-18% over the medium term.
Despite steadily improving ROCE, GHCL Textiles continues to trade at an undemanding valuation, leaving ample room for multiple expansion as its value-added fabric strategy gains further traction.
For further queries, please reach out to -
Garima Singla
Sr. Research Analyst
Mehal Gogia
Research Associate
Disclaimer - Informational only. Not investment advice.GoIndia Advisors LLP | SEBI Registered Research Analyst | Reg. No. INH000020040 | BSE Enlistment No. - 6518