Pearl Global Industries Ltd NSE: PGIL is a good buy due to rerating prospects

[Pee Vee]

PGIL is one of the leaders in design, manufacturing, and export of diverse apparel products for all seasons, with an annual capacity of 84mn pieces. Its manufacturing facilities are spread across five countries, thus making it a top contender to emerge as one of the top suppliers to global brands. It exports to various fashion brands and retailers across the globe. PGIL is a classic turnaround story with a focus on superior margin. The improvement in operational metrics was led by: i) a higher wallet share from existing clients and better productivity, ii) average realisation of 7% CAGR over FY20–24 on the back of a superior product mix, and iii) margin expansion due to a change in the product mix and operating leverage. We expect growth to be driven by: i) client additions and higher spends from existing customers; ii) incremental capex leading to steady volume growth; and iii) margin expansion on higher productivity. PGIL is a perfect candidate for a valuation re-rating given its execution capabilities, growth opportunities, and quality management