CRISIL Research has assigned a CRISIL IER fundamental grade of 3/5 to Nandan Denim (NDL). The grade indicates that the company’s fundamentals are 'good' relative to other listed equity securities in India. Our fair value of the stock is Rs 54 A share. At the current market price of Rs 43 a share, our valuation grade is 5/5 indicating that the market price has strong upside from the current levels. The grades are not a recommendation to buy, sell or hold the graded instrument, or a comment on the graded instrument's future market price or its suitability for a particular investor.

CRISIL Research expects revenues to grow at a two-year CAGR of 18% to ars 12.4 billion by FY16, primarily driven by exports - export sales are forecast to grow at a CAGR of 23.4% over the same period. Domestic sales are expected to remain steady and log 14.3% CAGR over FY14-16. The company's foray into shirting fabric and dyed yarn is expected to support top-line growth. EBITDA margin is expected to expand to 15.7% in FY16 from 14.8% currently, driven by increase in captive consumption of yarn and higher contribution from exports. However, owing to high depreciation and interest expense, adjusted PAT is expected to grow at a two-year CAGR of 7% to Rs 450 million by FY16.

CRISIL Research has used the discounted cash flow method to arrive at a fair value of Rs 54 a share for NDL. The fair value implies P/E multiples of 5.8x FY15E and 5.5x FY16E EPS respectively.

Shares of the company gained Rs 1.15, or 2.64%, to settle at Rs 44.70. The total volume of shares traded was 175,635 at the BSE (Wednesday).