Integra Garments and Textiles Limited (NSEI:INTEGRA), a INR₹105.73M small-cap, is a consumer discretionary company operating in an industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy luxury goods. Consumer discretionary analysts are forecasting for the entire industry, a somewhat weaker growth of 8.28% in the upcoming year . Today, I will analyse the industry outlook, as well as evaluate whether Integra Garments and Textiles is lagging or leading in the industry. See our latest analysis for Integra Garments and Textiles
What’s the catalyst for Integra Garments and Textiles’s sector growth?
E-commerce continues to be the fastest growing sales platform for consumer discretionary goods, changing the landscape for retailers. A large number of store closures and bankruptcies illustrates the shift in consumer preferences and increasing online competition. Over the past year, the industry saw growth of 3.81%, though still underperforming the wider Indian stock market. Integra Garments and Textiles lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Integra Garments and Textiles may be trading cheaper than its peers.
Is Integra Garments and Textiles and the sector relatively cheap?
The luxury goods industry is trading at a PE ratio of 13x, lower than the rest of the Indian stock market PE of 29x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Though, the industry did returned a lower 6.98% compared to the market’s 9.78%, which may explain the lower relative valuation. Since Integra Garments and Textiles’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Integra Garments and Textiles’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Integra Garments and Textiles recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Integra Garments and Textiles as part of your portfolio. However, if you’re relatively concentrated in luxury goods, you may want to value Integra Garments and Textiles based on its cash flows to determine if it is overpriced based on its current growth outlook.