17 December 2020 India | Home Textile | Sector Report

Home Textile
Work-from-home, hygiene focus to sustain earnings momentum

India’s cotton sheet export volumes to the US increased to 50mn sq. Ashutosh Somani
ashutosh.somani@jmfl.com | Tel: (91 22) 66303083
mtrs. in Oct’20 (+37% YoY) from 29mn sq. mtrs. in Sep’20. In value
Akshay Gupta, CFA
terms, sheet exports reached USD 87mn in Oct’20 (+23% YoY) vs. akshay.gupta@jmfl.com | Tel: (91 22) 66303018
Sep’20 levels of USD 57mn. Terry towel volumes increased to 11mn
sq. mtrs. in Oct’20 vs. 9mn sq. mtrs. in Sep’20. In value terms, exports
of terry towels stood at USD 60mn in Oct’20 (+15% YoY). India’s US imports mkt. shr. (val.) in made-ups
home textile exports to the US (sum of all products) stood at USD 100%
281mn in Oct (+25% YoY), compared to USD222mn in Sep’20. 13% 13% 14% 14% 15% 16%
75% 18% 18% 17% 17% 18% 19%
Home Textile exporters continue to be key beneficiaries of higher in-
home consumption due to increased work-from-home period and 50% 38% 36% 36% 37% 34% 31%
higher emphasis on health & hygiene driven by the pandemic.
25%
Margins of home textile manufacturers are likely to expand 31% 33% 33% 33% 34% 35%
significantly, driven by strong order books - improving scale of 0%
operations, YTD lower cotton prices (despite the recent uptick) and CY15 CY16 CY17 CY18 CY19 YTD'20
currency depreciation (USD rebound / crude imports). Integrated India China Pakistan ROW

players - Welspun India and Trident continue to be our preferred pick

Source: OTEXA, JM Financial
in the space.
 India’s YTD market share in total home textile exports to the US increases
c.1% YoY: Oct’20 witnessed an improvement in home textile exports to US imports mkt. shr. (val.) in cotton sheets
the US. Global cotton sheet export volumes to the US improved 100%
12% 12% 12%
sequentially to 118mn sq mtrs. in Oct from 77mn sq mtrs in Sep’20. Terry 14% 14% 14%
17% 16% 16% 17% 19%
towel volumes improved to 32mn sq. mtrs. from 26mn sq. mtrs. in 75% 21%

Sep’20. India’s volume share in Cotton sheet/Terry towel exports to the 50%
23% 22% 20% 21% 19% 15%
US stood at 42% (+4ppt YoY)/33% (-2ppt YoY) respectively.
25% 48% 49% 50% 49% 50% 50%
a) India’s share in US imports of cotton sheets reached 52% in Oct’20:
India’s cotton sheet export volumes to the US improved to 50mn sq mtrs. 0%
CY15 CY16 CY17 CY18 CY19 YTD'20
in Oct’20 (+37% YoY) from a low of 29mn sq. mtrs in Sep’20. Exports
India China Pakistan ROW
value increased to USD 87mn in Oct’20 (+23% YoY) from Sep’20 levels
of USD 57mn. India’s market share (in value terms) stood at 52% in Source: OTEXA, JM Financial
Oct’20 (+1ppt YoY/+4ppt MoM).
b) India’s share in US imports of terry towels stood at 39% in Oct’20: India’s US imports mkt. shr. (val.) in terry towels
export volumes of terry towels improved to 11mn sq. mtrs. in Oct’20 100%
(+13% YoY) from a low of 9mn sq mtrs in Sep’20. Exports in value terms 15% 15% 16% 16% 16% 15%

improved to USD 60mn (+15% YoY) from USD 52mn in Sep’20. India’s 75% 22% 22% 21% 20% 21% 21%

market share (in value terms) stood at 39% in Oct’20 (-1ppt YoY/-3ppt 50% 25% 23% 24% 25% 24% 21%
MoM). Trident has reported strong volume growth in 3QFY21 QTD. Bath
linen volumes reached 9.4mn kgs, up 2.5x YoY while bed linen volumes 25%
38% 40% 39% 39% 39% 42%
reached 7.5mn mtrs, up 1.6x YoY. 0%
CY15 CY16 CY17 CY18 CY19 YTD'20
c) India total home textile exports to the US at USD281mn in Nov’20: India China Pakistan ROW
India’s home textile exports to the US (sum of all products) stood at USD
281mn in Oct (+25% YoY), compared to USD222mn in Sep’20. Source: OTEXA, JM Financial

 Sector recovering from COVID; orders continue to improve: US witnessed

a post pandemic recovery in the home textile sector, with structural JM Financial Research is also available on:
Bloomberg - JMFR <GO>,
uptick in demand owing to ‘work from home’/hygiene ascribing more
Thomson Publisher & Reuters
relevance to bed sheets/towels use. Fund raising by global retailers has S&P Capital IQ and FactSet
ensured return to normalcy in home textile order books and working
capital cycle. Home textile manufacturers are now operating at a Please see Appendix I at the end of this
significantly higher capacity as orders continue to galore. report for Important Disclosures and
Disclaimers and Research Analyst
Certification.

JM Financial Institutional Securities Limited

Home Home Textile 14 December 2020

 Deficit expected for world cotton in 2020-21: The USDA projects 2020-
21 global cotton production to decline by 6.7% YoY to 24.8mn tons
while Global consumption is estimated to increase by 13.1% YoY to
25.2mn tons, implying global deficit of 0.4mn tons. For China, cotton
production is expected to increase by c.1% YoY to 6mn tons and
consumption is expected to increase by 15% YoY to 8.3mn tons. This
should lead to a 2.3mn tons deficit in CY21E. For India, production is
estimated to be flat YoY at 6.4mn tons but consumption should see an
uptick of 20% YoY to 5.2mn tons, leading to a surplus of 1.2mn tons.
Ending stocks in India are expected to increase by c.8% YoY to 4.2mn
tons. Domestic cotton prices have declined c.16% YoY YTD CY20.
However, since Mar’20, the domestic cotton prices have rebounded by
8%. Cotlook and US cotton prices have corrected by 8.4% and 6.3%
YoY YTD CY20 respectively. Current yarn price is broadly in line with
Dec’19 levels.
 Earnings momentum to sustain; Welspun/Trident preferred picks: Pent up
demand for home textiles should continue to drive revenue growth for
home textile manufacturers in 3Q/4QFY21. Structural uptick in home
textile demand owing to ‘work from home’/hygiene ascribing more
relevance to bed sheets/towels usage is likely to further aid demand.
Home textile manufacturers are currently operating at significantly higher
capacity as orders continue to galore. Outbreak of the pandemic has
thrown open an opportunity for the home textile manufacturers to
venture into health and hygiene textile segment – PPEs, facemasks,
wipes, disposable linens etc. Margins of home textile manufacturers are
likely to expand significantly, driven by strong order books - improving
scale of operations, YTD lower cotton prices YoY (despite the recent
uptick) and currency depreciation (USD rebound / crude imports).
Integrated players - Welspun India and Trident continue to be our
preferred pick in the space.

Exhibit 1. US imports of cotton sheets

CY18 YoY (%) CY19 YoY (%) YTD20 YoY (%) Aug'20 YoY (%) Sep'20 YoY (%) Oct'20 YoY (%)
Value (USD mn)
World 1,427 -1.0% 1,391 -2.5% 955 -18.7% 118 -10.7% 117 -13.4% 167 20.3%
India 705 -1.7% 691 -2.0% 481 -16.9% 62 6.0% 57 -15.6% 87 23.2%
China 304 3.9% 269 -11.6% 141 -39.6% 13 -48.6% 17 -17.7% 21 -6.1%
Pakistan 242 6.4% 267 10.2% 199 -11.6% 25 -11.1% 24 -1.4% 32 16.1%
ROW 175 -13.9% 163 -6.7% 134 -1.8% 19 -13.0% 20 -15.5% 28 47.0%
Volume (mn sq. mts)
World 1,038 -1.0% 983 -5.2% 565 -23.1% 80 -9.1% 77 -20.4% 118 22.9%
India 383 2.0% 361 -5.7% 208 -21.5% 31 8.6% 29 -25.6% 50 36.6%
China 289 -2.4% 245 -15.1% 109 -44.6% 11 -48.8% 15 -16.7% 20 3.4%
Pakistan 268 5.1% 293 9.4% 202 -5.1% 27 0.1% 25 5.3% 32 8.3%
ROW 98 -19.6% 84 -14.5% 47 -23.2% 10 -1.5% 8 -49.7% 16 52.7%
Realisation (USD/mt)
World 2.8 0.0% 2.8 2.8% 3.4 5.7% 1.5 -1.9% 1.5 8.8% 1.4 -2.1%
India 3.7 -3.6% 3.8 3.9% 4.6 5.8% 2.0 -2.4% 2.0 13.4% 1.7 -9.8%
China 2.1 6.5% 2.2 4.1% 2.6 9.0% 1.2 0.3% 1.1 -1.3% 1.0 -9.1%
Pakistan 1.8 1.2% 1.8 0.7% 2.0 -6.8% 0.9 -11.2% 1.0 -6.4% 1.0 7.1%
ROW 3.6 7.0% 3.9 9.1% 5.7 27.7% 1.8 -11.7% 2.4 68.0% 1.7 -3.7%
Source: OTEXA, JM Financial

JM Financial Institutional Securities Limited Page 2

Home Home Textile 14 December 2020

Exhibit 2. US imports of terry and other towels

CY18 YoY (%) CY19 YoY (%) YTD20 YoY (%) Aug'20 YoY (%) Sep'20 YoY (%) Oct'20 YoY (%)
Value (USD mn)
World 1,635 -0.9% 1,616 -1.2% 1,165 -15.7% 121 3.4% 125 6.5% 154 18.3%
India 635 -1.1% 637 0.3% 491 -9.3% 53 7.4% 52 7.0% 60 14.5%
China 406 2.4% 384 -5.6% 247 -26.0% 24 7.6% 27 7.5% 36 24.3%
Pakistan 331 -5.9% 340 2.8% 248 -14.3% 26 0.8% 26 12.5% 34 25.2%
ROW 263 1.4% 256 -2.9% 179 -17.8% 19 -8.1% 20 -2.9% 24 11.2%
Volume (mn sq. mts.)
World 325 -0.7% 323 -0.7% 200 -18.3% 26 1.9% 26 1.8% 32 16.8%
India 103 -2.4% 102 -1.2% 67 -12.4% 9 11.8% 9 14.7% 11 12.6%
China 64 1.2% 63 -0.1% 35 -27.7% 5 -4.6% 5 7.1% 6 19.0%
Pakistan 110 -2.8% 112 1.2% 71 -16.6% 9 4.5% 8 -0.3% 11 23.5%
ROW 48 5.9% 46 -4.7% 27 -22.6% 4 -15.2% 3 -25.5% 4 8.5%
Realisation (USD/mt)
World 5.0 -0.2% 5.0 -0.5% 5.8 3.2% 4.6 1.4% 4.9 4.6% 4.8 1.3%
India 6.2 1.4% 6.2 1.5% 7.3 3.5% 5.8 -3.9% 5.6 -6.7% 5.6 1.7%
China 6.4 1.3% 6.0 -5.5% 7.0 2.4% 5.3 12.8% 5.5 0.4% 5.9 4.4%
Pakistan 3.0 -3.3% 3.0 1.6% 3.5 2.7% 2.9 -3.5% 3.1 12.9% 3.1 1.5%
ROW 5.4 -4.3% 5.5 1.9% 6.6 6.2% 5.1 8.3% 6.6 30.4% 5.9 2.4%
Source: OTEXA, JM Financial

Exhibit 3. Cotton prices (USD/kg)

CY18 CY19 YoY (%) YTD'19 YTD'20 YoY (%) CMP YTD chg (%)

Cotlook A 2.0 1.7 -15% 1.7 1.6 -8.4% 1.7 0.4% Increasing China- India
US 1.8 1.5 -19% 1.5 1.4 -6.3% 1.6 6.3% cotton spread favourable for
Indian manufacturers
India 1.8 1.7 -5% 1.7 1.4 -15.9% 1.6 4.9%

China 2.4 2.1 -14% 2.1 1.9 -11.1% 2.2 15.1%

China India spread 0.7 0.4 -39% 0.4 0.4 9.8% 0.6 51.7%
Source: Bloomberg, JM Financial; Note: Cotlook A is an average of the cheapest 5 quotations from a selection of the principal upland cottons traded
internationally

Exhibit 4. Exchange rate: Local currency/USD YoY INR depreciation in CY19

YoY dep. YoY YTD
Country Currency CY18 CY19 % YTD'19 YTD'20 dep. % CMP dep %
has favourably impacted
India INR 68.4 70.4 2.9% 70.4 74.2 5.4% 73.7 3.4% margins for home textile
China CNY 6.6 6.9 4.4% 6.9 6.9 0.3% 6.5 -6.1% exporters; depreciation of PKR a
Pakistan PKR 121.8 150.4 23.5% 150.1 162.0 7.9% 160.2 3.5% concern
Source: Bloomberg, JM Financial

Exhibit 5. India yarn/cotton prices (INR/kg)

YoY dep. YoY dep. YTD %
CY18 CY19 % YTD'19 YTD'20 % CMP dep Spot yarn-cotton spread has
Cotton - Shankar 6 122 120 -1.9% 120 107 -11.4% 117 5.6%
increased
Cotton yarn 210 203 -3.3% 205 196 -4.4% 211 2.1%
Yarn Cotton Spread 88 83 -5.3% 85 89 5.5% 94 -1.9%
Source: Bloomberg, Crisil, JM Financial

Exhibit 6. US imports value: Country wise market share

Category Oct’20 Oct’19 CY19
India China Pakistan India China Pakistan India China Pakistan
Category 360: Pillow cases 56% 12% 15% 52% 16% 16% 53% 19% 15%
Category 361: Cotton sheets 52% 13% 19% 51% 16% 20% 50% 19% 19%
Category 362: Bedspreads & quilts 22% 50% 16% 19% 54% 19% 17% 58% 16%
Category 363: Terry & other towels 39% 23% 22% 40% 22% 21% 39% 24% 21%
Category 369: Bedding & pillow covers 32% 36% 16% 29% 38% 15% 27% 40% 16%
Category 360, 361, 362, 363, 369: Cotton made-ups 38% 29% 18% 36% 31% 18% 34% 34% 18%
Source: OTEXA, JM Financial

JM Financial Institutional Securities Limited Page 3

 0%
25%
75%
100%

50%
0%
25%
50%
75%
100%

0%
50%
75%

25%
100%
17% 60%

6%
35% 9% 45% 81%

17%
11%
12% 17% 57%
Home Home Textile

15% 26% 12% 47% 83%

11% 8%
7% 7%
18% 23% 15% 44% 16% 15% 58% 5% 70%

14% 11%
13%

India

India
India
18% 30% 15% 38% 20% 13% 58%

9%
18% 60%
12%
12% 11%
22% 43% 18% 17% 31% 21% 25% 31% 18%

23%

China
27%
23%

China

China
29% 39% 18% 14% 37% 23% 15% 47% 13%

JM Financial Institutional Securities Limited

31% 38% 18% 13% 38% 22% 15% 48% 12%

Pakistan
Pakistan
Pakistan

Source: OTEXA, JM Financial; Note: For category 361 as per OTEXA

Source: OTEXA, JM Financial; Note: For category 362 as per OTEXA

33% 36% 18% 13% 40% 22% 15% 49% 14%
33% 36% 17% 14%

ROW
39% 21% 16%

ROW
ROW 50% 14%
33% 37% 17% 14%
39% 20% 16% 49% 12%
34% 34% 18% 15%
39% 21% 16% 50% 12%

Source: OTEXA, JM Financial; Note: For sum of category 360,361,362,363 & 369 as per OTEXA
35% 31% 19% 16%
42% 21% 15% 50% 14%

26% 25% 23% 24% 25% 24% 21%

Exhibit 9. Market share (value) for US imports of terry towels—yearly
17% 17% 16% 16% 17% 19% 21%

23% 23% 22% 20% 21% 19% 15%

Exhibit 11. Mkt shr (value) for US imports of cotton made ups—yearly
Exhibit 7. Market share (value) for US imports of cotton sheets—yearly

0%
25%
50%
75%
100%

0%
25%
50%
75%
100%

0%
25%
50%
75%
100%
Jun/201 9 32% 35% 17% 16% Jun/201 9 38% 23% 22% 17% Jun/2019 50% 23% 17%10%
Jul/201 9 34% 35% 16% 15% Jul/201 9 43% 23% 20% 14% Jul/201 9 49% 21% 17% 13%
Aug /20 19 33% 33% 17% 16% Aug /2019 42% 19% 22% 17% Aug/2019 44% 18% 21% 16%
Sep /201 9 35% 32% 16% 16% Sep /201 9 42% 21% 20% 18% Sep /201 9 50% 15% 18% 17%

India
India
India

Oct/2019 36% 31% 18% 15% Oct/2019 40% 22% 21% 17% Oct/2019 51% 16% 20% 14%
Nov /20 19 37% 31% 17% 15% Nov /20 19 41% 22% 20% 17% Nov/20 19 55% 15% 17% 12%
Dec/2019 34% 32% 19% 16% Dec/2019 40% 21% 23% 16% Dec/2019 47% 18% 22% 13%

China
China
China

Jan/2020 36% 33% 17% 15% Jan/2020 41% 25% 20% 14% Jan/2020 56% 16% 18%10%
Feb/2020 38% 28% 17% 17% Feb/2020 43% 22% 20% 15% Feb/2020 57% 15% 17%11%
Mar/2020 41% 22% 22% 15% Mar/2020 44% 18% 22% 17% Mar/2020 56% 8% 23% 12%

Pakistan
Pakistan

Source: OTEXA, JM Financial; Note: For category 362 as per OTEXA

Pakistan

Source: OTEXA, JM Financial; Note: For category 361 as per OTEXA

Apr /202 0 35% 28% 21% 16% Apr /202 0 44% 21% 22% 13% Apr /202 0 47% 16% 22% 14%
May/2020 21% 43% 19% 17% May/2020 36% 25% 22% 17% May/2020 34% 31% 26% 9%

ROW
ROW

June/2020 26% 37% 20% 18% June/2020 44% 15% 22% 19%
ROW

June/2020 45% 17% 24% 14%

July /202 0 31% 35% 19% 16% July /202 0 43% 19% 23% 15% July /202 0 43% 17% 24% 16%
Aug /20 20 35% 30% 18% 16% Aug /20 20 44% 20% 21% 15% Aug /20 20 53% 11% 21% 16%
Sep /202 0 37% 29% 17% 17% Sep /202 0 42% 22% 21% 16%

Source: OTEXA, JM Financial; Note: For sum of category 360,361,362,363 & 369 as per OTEXA
Sep /202 0 48% 15% 20% 17%
Oct/2020 38% 29% 18% 16% Oct/2020 39% 23% 22% 16% Oct/2020 52% 13% 19% 17%
Exhibit 12. Mkt shr (value) for US imports of cotton made ups -mthly
Exhibit 10. Mkt share (value) for US imports of terry towels—monthly

Page 4
14 December 2020

Exhibit 8. Market share (value) for US imports of cotton sheets—mntly

Home Home Textile 14 December 2020

Exhibit 13. India’s cotton balance sheet (mn tons)

2017/18 2018/19 2019/20 2020/21P
Production 6.3 5.6 6.4 6.4 As per USDA, India’s cotton
Consumption 5.3 5.2 4.4 5.2
production in 2020-21 is
Surplus/(Deficit) 1.1 0.4 2.1 1.2
Exports 1.1 0.8 0.7 1.1
expected to remain flat
Ending stocks 1.9 2.0 3.9 4.2
Source: USDA, JM Financial

Exhibit 14. Comparison of cotton prices in various regions

(USD/Kg) Globally, cotton prices are now
3.4
rebounding
2.8

2.2

1.6

1.0
Mar-12

Mar-15

Mar-16

Mar-18

Mar-19

Mar-20
Mar-13

Mar-14

Mar-17
Nov-11

Nov-12

Nov-14

Nov-15

Nov-18

Nov-19
Nov-13

Nov-16

Nov-17

Nov-20
Jul-12

Jul-14

Jul-15

Jul-16

Jul-18

Jul-19
Jul-13

Jul-17

Jul-20
China cotton prices India S-6 cotton prices US cotton price

Source: Bloomberg, JM Financial; Note: S-6 = Shankar 6 cotton

Exhibit 15. Cotton price spread between India and China Average China-India cotton price
(USD/Kg) spread is at c. USD 0.45/kg YTD
4.0
CY’20
3.0

2.0

1.0

0.0
Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20
Nov-13

Nov-14

Nov-15

Nov-16

Nov-17

Nov-18

Nov-19

Nov-20
Jul-13

Jul-14

Jul-15

Jul-16

Jul-17

Jul-18

Jul-19

Jul-20

China cotton prices India S-6 cotton prices Spread

Source: Bloomberg, JM Financial; S-6 = Shankar 6 cotton

Exhibit 16. Yarn-cotton spread The current Indian yarn-cotton

(INR/kg) spread stands at INR 94/kg
270

220

170

120

70

20
Apr-13

Oct-13
Jan-14

Oct-14
Jan-15

Oct-15
Jan-16

Oct-16
Jan-17

Oct-17
Jan-18

Jul-18
Oct-18
Jan-19

Oct-19
Jan-20

Oct-20
Apr-14

Apr-15

Apr-16

Apr-17

Apr-18

Apr-19

Apr-20
Jul-13

Jul-14

Jul-15

Jul-16

Jul-17

Jul-19

Jul-20

Cotton Yarn Cotton- Shankar 6 Yarn-cotton spread

Source: Bloomberg, Crisil, JM Financial

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Home Home Textile 14 December 2020

Exhibit 17. Installed capacity of Indian bed sheet players Exhibit 18. Installed capacity of Indian terry towel players
mn mts mn kgs
100 100

75 75

50
90 90 90 50
2
90 90
3
61
25 45 43 25

25
0 14
Alok Indo Co unt Wel spu n Himatsi ngka GHCL Trident 0
Seid e Trident Welspun Himatsingka Seide Alok
Source: Company, JM Financial; Note: 1Capacity utilisation may be much lower, 2 ICNT added 22mn mts
capacity in FY17, 3WLSI added 18 mn capacity added in FY17, 4 HimatSingka Seide added 15 mn mts
capacity in 3QFY19; 5 Processing capacity of GHCL & commissioned 9mn mtrs capacity in FY18; 6 Source: Company, JM Financial; Note: Himatsingka added 25mn capacity in Oct’19; Welspun added
Trident added 43 mn mts capacity in FY16 end 10mn ton capacity in FY19 respectively

Exhibit 19. Trident - monthly production

Category Unit Jun'20 Jul'20 Aug'20 Sep'20 Oct'20 Nov'20
Bath Linen mn kgs 3.6 4.4 4.5 4.7 4.8 4.6
Bed Linen mn meters 2.2 3.1 2.8 3.8 4.2 3.3
Yarn mn kgs 8.5 9.1 8.9 9.1 9.6 9.2
Paper MT 12,013 12,340 10,563 11,939 13,683 12,274
Chemical MT 7,390 7,674 7,862 7,631 8,219 8,168
Source: Company, JM Financial

Exhibit 20. Welspun: FY23E EPS sensitivity to INR/USD and cotton price (INR)
Avg. price of cotton (INR/kg)
102 107 112 117 122
70.5 5.7 5.2 4.7 4.1 3.6
Avg. INR/USD

72.5 6.8 6.3 5.8 5.3 4.8

74.5 8.0 7.5 7.0 6.5 5.9
76.5 9.2 8.6 8.1 7.6 7.1
78.5 10.3 9.8 9.3 8.8 8.3
Source: JM Financial

Exhibit 21. Welspun: FY23E target price sensitivity to INR/USD and cotton price (INR/share) A 1% decrease in cotton prices
Avg. price of cotton (INR/kg) increases fair value by 1.6%, while
102 107 112 117 122 a 1% INR depreciation increases fair
70.5 68 62 56 50 44 value by 6.2%
Avg. INR/USD

72.5 82 76 70 64 57
74.5 96 90 84 78 71
76.5 110 104 98 91 85
78.5 124 118 112 105 99
Source: JM Financial

Exhibit 22. Trident: FY23E EPS sensitivity to INR/USD and cotton price (INR)
Avg. price of cotton (INR/kg)
102 107 112 117 122
72.5 0.8 0.8 0.7 0.6 0.5
Avg. INR/USD

73.5 0.9 0.8 0.7 0.7 0.6

74.5 1.0 0.9 0.8 0.7 0.7
75.5 1.0 0.9 0.9 0.8 0.7
76.5 1.1 1.0 0.9 0.9 0.8
Source: JM Financial

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Home Home Textile 14 December 2020

Exhibit 23. Trident: FY23E target price sensitivity to INR/USD and cotton price (INR/share)
Avg. price of cotton (INR/kg) A 1% decrease in cotton prices
102 107 112 117 122 increases fair value by c.2%, while a
1% INR depreciation increases fair
Avg. INR/USD

72.5 10.3 9.4 8.5 7.7 6.8

73.5 11.0 10.1 9.3 8.4 7.5 value by 6.1%
74.5 11.7 10.9 10.0 9.1 8.2
75.5 12.5 11.6 10.7 9.8 8.9
76.5 13.2 12.3 11.4 10.5 9.6
Source: JM Financial

Exhibit 24. Textile value chain Welspun, Trident and GHCL are
fully integrated players, Indo Count
Ginning and Himatsingka are partially
integrated

Yarn Fabric
Made-ups /
Spinning Weaving Processing Garments

Distribution

Vardhman Textiles

Himatsingka Seide Indo Count (partially

(partially integrated) integrated)

GHCL (fully Welspun (fully Trident (fully

integrated) integrated) integrated)

Source: JM Financial

Exhibit 25. Details of export benefits to Home textile players

Current rate Remarks
ROSCTL 8.20% Remission of Duties or Taxes on Export Products (RoDTEP) was to replace
ROSL and MEIS w.e.f. 01/01/2020. MEIS benefit (4%) was withdrawn in
Jan’20 with a retrospective effect.
Duty Drawback 2.6%+input tax credit Increased from 2% to 2.6% in Dec'18
Source: Industry, JM Financial

Exhibit 26. Funds raised by US retailers post COVID-19

Money raised
Retailer Source of funding
(USD mn)
245 Non-core business asset sale
Bed bath and beyond
850 Secured credit facility

3,150 Asset based credit

Macy's
1,300 Bond offering

Kohl's 600 Bond offering

Costco 4,000 Debt issue

Source: Media articles, JM Financial

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Home Home Textile 14 December 2020

Exhibit 27. Comparative valuation

EPS CAGR
Companies PE (x) EV/EBITDA (x) ROE (%) ROCE (%)
(%)
FY21E FY22E FY23E FY21-23E FY21E FY22E FY23E FY21E FY22E FY23E FY21E FY22E FY23E

Home textile average 11.4 16.9 4.1 11.0 8.5 6.6

Trident 19.1 14.2 11.8 27% 8.1 6.6 5.5 8% 10% 11% 6% 7% 8%
Welspun India 14.3 12.6 10.7 16% 7.7 7.1 6.0 16% 16% 16% 10% 10% 11%
Indo Count Industries 17.9 16.2 NA NA 11.3 10.3 NA 15% 14% NA 17% 17% NA
Himatsingka Seide -81.1 8.5 0.1 NA 13.4 7.0 6.1 -2% 12% 14% 3% 11% 12%
Luolai Lifestyle Technology-A 18.6 16.4 0.8 12% 11.8 10.0 8.9 13% 14% 14% 29% 33% 32%
Shenzhen Fuanna Bedding-A 11.8 10.6 0.7 11% 7.8 6.9 6.2 15% 15% 15% 25% 24% 23%
GHCL 5.9 4.6 0.7 31% 5.3 4.1 3.4 11% 14% 15% 13% 16% 17%
Vardhman Textiles 26.2 10.2 0.9 75% 12.5 6.7 5.6 4% 9% 10% 4% 11% 12%
Source: Bloomberg, JM Financial; Note: Valuation as of 16 Dec’20; Note: Home textile average does not include Vardhman textiles and GHCL

Exhibit 28. USDA world cotton production, supply and trade (million tons)
2016/17 2017/18 2018/19 2019/20 2020/21P YoY (%)
Production
India 5.9 6.3 5.6 6.4 6.4 -
China 5.0 6.0 6.0 5.9 6.0 0.9
United States 3.7 4.6 4.0 4.3 3.5 (19.9)
Pakistan 1.7 1.8 1.7 1.4 1.0 (27.4)
Total 23.2 27.0 25.8 26.6 24.8 (6.7)
USE Dom. Consumption
China 8.2 8.9 8.6 7.2 8.3 15.2
India 5.2 5.3 5.2 4.4 5.2 20.0
Pakistan 2.2 2.4 2.3 2.0 2.2 8.7
Bangladesh 1.5 1.6 1.6 1.4 1.6 12.3
Turkey 1.4 1.5 1.5 1.4 1.5 6.1
Total 25.0 26.7 26.2 22.3 25.2 13.1
Surplus (production - consumption)
China (3.2) (2.9) (2.6) (1.3) (2.3) 82.7
India 0.7 1.1 0.4 2.1 1.2 (42.1)
Pakistan 0.6 0.6 0.7 0.7 1.2 83.3
Total (1.8) 0.2 (0.4) 4.3 (0.4) (108.7)
Imports
China 1.1 1.2 2.1 1.6 2.1 33.1
Bangladesh 1.5 1.7 1.6 1.5 1.6 4.3
Pakistan 0.5 0.7 0.6 0.9 0.9 8.2
Total 8.2 8.9 9.2 8.8 9.3 6.6
Exports
United States 3.2 3.5 3.2 3.4 3.2 (6.0)
India 1.0 1.1 0.8 0.7 1.1 56.2
Total 8.1 8.9 9.0 8.9 9.3 4.6
Ending Stocks
China 10.5 8.3 7.8 8.0 7.9 (1.7)
India 2.4 1.9 2.0 3.9 4.2 8.4
United States 0.6 0.9 1.1 1.6 1.2 (21.4)
Pakistan 0.5 0.6 0.5 0.7 0.5 (25.7)
Total 18.9 17.7 17.5 21.6 21.2 (1.9)
Stock to Use ratio
China 129% 93% 90% 112% 95%
India 46% 36% 39% 89% 81%
United States 42% 62% 70% 110% 81%
Pakistan 34% 38% 34% 52% 34%
World 76% 66% 67% 97% 84%
Source: USDA, JM Financial; Note: Season beginning August 1

JM Financial Institutional Securities Limited Page 8

Home Home Textile 14 December 2020

APPENDIX I

JM Financial Inst itut ional Secur ities Lim ited

Corporate Identity Number: U67100MH2017PLC296081
Member of BSE Ltd., National Stock Exchange of India Ltd. and Metropolitan Stock Exchange of India Ltd.
SEBI Registration Nos.: Stock Broker - INZ000163434, Research Analyst – INH000000610
Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.
Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: jmfinancial.research@jmfl.com | www.jmfl.com
Compliance Officer: Mr. Sunny Shah | Tel: +91 22 6630 3383 | Email: sunny.shah@jmfl.com

Definition of ratings
Rating Meaning
Buy Total expected returns of more than 10% for large-cap stocks* and REITs and more than 15% for all other stocks, over the next twelve
months. Total expected return includes dividend yields.
Hold Price expected to move in the range of 10% downside to 10% upside from the current market price for large-cap* stocks and REITs and
in the range of 10% downside to 15% upside from the current market price for all other stocks, over the next twelve months.
Sell Price expected to move downwards by more than 10% from the current market price over the next twelve months.
* Large-cap stocks refer to securities with market capitalisation in excess of INR200bn. REIT refers to Real Estate Investment Trusts.
Research Analyst(s) Certification

The Research Analyst(s), with respect to each issuer and its securities covered by them in this research report, certify that:

All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and

No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research
report.

Important Disclosures

This research report has been prepared by JM Financial Institutional Securities Limited (JM Financial Institutional Securities) to provide information about the
company(ies) and sector(s), if any, covered in the report and may be distributed by it and/or its associates solely for the purpose of information of the select
recipient of this report. This report and/or any part thereof, may not be duplicated in any form and/or reproduced or redistributed without the prior written
consent of JM Financial Institutional Securities. This report has been prepared independent of the companies covered herein.

JM Financial Institutional Securities is registered with the Securities and Exchange Board of India (SEBI) as a Research Analyst and a Stock Broker having trading
memberships of the BSE Ltd. (BSE), National Stock Exchange of India Ltd. (NSE) and Metropolitan Stock Exchange of India Ltd. (MSEI). No material disciplinary
action has been taken by SEBI against JM Financial Institutional Securities in the past two financial years which may impact the investment decision making of the
investor.

JM Financial Institutional Securities renders stock broking services primarily to institutional investors and provides the research services to its institutional
clients/investors. JM Financial Institutional Securities and its associates are part of a multi-service, integrated investment banking, investment management,
brokerage and financing group. JM Financial Institutional Securities and/or its associates might have provided or may provide services in respect of managing
offerings of securities, corporate finance, investment banking, mergers & acquisitions, broking, financing or any other advisory services to the company(ies)
covered herein. JM Financial Institutional Securities and/or its associates might have received during the past twelve months or may receive compensation from
the company(ies) mentioned in this report for rendering any of the above services.

JM Financial Institutional Securities and/or its associates, their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell
the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) covered under this report or (c) act as an advisor or lender/borrower to,
or may have any financial interest in, such company(ies) or (d) considering the nature of business/activities that JM Financial Institutional Securities is engaged in,
it may have potential conflict of interest at the time of publication of this report on the subject company(ies).

Neither JM Financial Institutional Securities nor its associates or the Research Analyst(s) named in this report or his/her relatives individually own one per cent or
more securities of the company(ies) covered under this report, at the relevant date as specified in the SEBI (Research Analysts) Regulations, 2014.

The Research Analyst(s) principally responsible for the preparation of this research report and members of their household are prohibited from buying or selling
debt or equity securities, including but not limited to any option, right, warrant, future, long or short position issued by company(ies) covered under this report.
The Research Analyst(s) principally responsible for the preparation of this research report or their relatives (as defined under SEBI (Research Analysts) Regulations,
2014); (a) do not have any financial interest in the company(ies) covered under this report or (b) did not receive any compensation from the company(ies) covered
under this report, or from any third party, in connection with this report or (c) do not have any other material conflict of interest at the time of publication of this
report. Research Analyst(s) are not serving as an officer, director or employee of the company(ies) covered under this report.

While reasonable care has been taken in the preparation of this report, it does not purport to be a complete description of the securities, markets or
developments referred to herein, and JM Financial Institutional Securities does not warrant its accuracy or completeness. JM Financial Institutional Securities may
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This
report is provided for information only and is not an investment advice and must not alone be taken as the basis for an investment decision.

JM Financial Institutional Securities Limited Page 9

Home Home Textile 14 December 2020

The investment discussed or views expressed or recommendations/opinions given herein may not be suitable for all investors. The user assumes the entire risk of
any use made of this information. The information contained herein may be changed without notice and JM Financial Institutional Securities reserves the right to
make modifications and alterations to this statement as they may deem fit from time to time.

This report is neither an offer nor solicitation of an offer to buy and/or sell any securities mentioned herein and/or not an official confirmation of any transaction.

This report is not directed or intended for distribution to, or use by any person or entity who is a citizen or resident of or located in any locality, state, country or
other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject JM Financial Institutional
Securities and/or its affiliated company(ies) to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be
eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession this report may come, are required to inform themselves of
and to observe such restrictions.

Persons who receive this report from JM Financial Singapore Pte Ltd may contact Mr. Ruchir Jhunjhunwala (ruchir.jhunjhunwala@jmfl.com) on +65 6422 1888 in
respect of any matters arising from, or in connection with, this report.

Additional disclosure only for U.S. persons: JM Financial Institutional Securities has entered into an agreement with JM Financial Securities, Inc. ("JM Financial
Securities"), a U.S. registered broker-dealer and member of the Financial Industry Regulatory Authority ("FINRA") in order to conduct certain business in the
United States in reliance on the exemption from U.S. broker-dealer registration provided by Rule 15a-6, promulgated under the U.S. Securities Exchange Act of
1934 (the "Exchange Act"), as amended, and as interpreted by the staff of the U.S. Securities and Exchange Commission ("SEC") (together "Rule 15a-6").

This research report is distributed in the United States by JM Financial Securities in compliance with Rule 15a-6, and as a "third party research report" for
purposes of FINRA Rule 2241. In compliance with Rule 15a-6(a)(3) this research report is distributed only to "major U.S. institutional investors" as defined in Rule
15a-6 and is not intended for use by any person or entity that is not a major U.S. institutional investor. If you have received a copy of this research report and are
not a major U.S. institutional investor, you are instructed not to read, rely on, or reproduce the contents hereof, and to destroy this research or return it to JM
Financial Institutional Securities or to JM Financial Securities.

This research report is a product of JM Financial Institutional Securities, which is the employer of the research analyst(s) solely responsible for its content. The
research analyst(s) preparing this research report is/are resident outside the United States and are not associated persons or employees of any U.S. registered
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requirements of FINRA and may not be subject to the Rule 2241 restrictions on communications with a subject company, public appearances and trading
securities held by a research analyst account.

JM Financial Institutional Securities only accepts orders from major U.S. institutional investors. Pursuant to its agreement with JM Financial Institutional Securities,
JM Financial Securities effects the transactions for major U.S. institutional investors. Major U.S. institutional investors may place orders with JM Financial
Institutional Securities directly, or through JM Financial Securities, in the securities discussed in this research report.

Additional disclosure only for U.K. persons: Neither JM Financial Institutional Securities nor any of its affiliates is authorised in the United Kingdom (U.K.) by the
Financial Conduct Authority. As a result, this report is for distribution only to persons who (i) have professional experience in matters relating to investments
falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the "Financial Promotion Order"), (ii)
are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Promotion Order, (iii) are outside
the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial
Services and Markets Act 2000) in connection with the matters to which this report relates may otherwise lawfully be communicated or caused to be
communicated (all such persons together being referred to as "relevant persons"). This report is directed only at relevant persons and must not be acted on or
relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will
be engaged in only with relevant persons.

Additional disclosure only for Canadian persons: This report is not, and under no circumstances is to be construed as, an advertisement or a public offering of the
securities described herein in Canada or any province or territory thereof. Under no circumstances is this report to be construed as an offer to sell securities or as
a solicitation of an offer to buy securities in any jurisdiction of Canada. Any offer or sale of the securities described herein in Canada will be made only under an
exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable
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similar regulatory authority in Canada has reviewed or in any way passed upon these materials, the information contained herein or the merits of the securities
described herein and any representation to the contrary is an offence. If you are located in Canada, this report has been made available to you based on your
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such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Under no circumstances is the
information contained herein to be construed as investment advice in any province or territory of Canada nor should it be construed as being tailored to the
needs of the recipient. Canadian recipients are advised that JM Financial Securities, Inc., JM Financial Institutional Securities Limited, their affiliates and authorized
agents are not responsible for, nor do they accept, any liability whatsoever for any direct or consequential loss arising from any use of this research report or the
information contained herein.

JM Financial Institutional Securities Limited Page 10