Is there a twist in the tale for cotton spinners round the corner, it appears to be the case given the 15% increase in cotton prices during the October-December quarter.
The assumption acquires strength from the fact that most spinners as most have procured the cotton for full-year at much lower prices.
Such scenarios augur well from companies such as Nitin spinners, Ambika cotton, vardhaman, kpr mills, APM, PBM, and others.
There are expectations that cotton may increase further if the US and China settle their trade war.
Earlier, there was expectations that the cotton spinning industry may take a hit from the demand slowdown.
Both revenues and operating profits of domestic spinners was likely to see a drop.
Spinners expect that the overall FY20 performance will be weighed down by the tepid volumes and weak earnings seen so far.
The cotton spinners performance has been severely constrained in the current fiscal, being adversely impacted by the demand slowdown,
unfavorable raw material prices and rising funding requirements.
While export volumes have seen some uptick in recent months, as against the sharp de-growth witnessed between May-September 2019.
The analyst expects a revenue de-growth of around 6% for spinners due to weak export demand amid increasing competition from other countries and sluggishness in domestic consumption levels.
Meanwhile, the credit profile of spinners has weakened in the recent quarters, with learning from operations and liquidity position facing pressures in H1 FY2020, amid rising debt levels.
The scenario seems to be changing for good with cotton price revival and signs the US-China trade truce to buck the global trade.
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