Tel Aviv investment house Gmul Sahar this week downgraded Delta Galil Industries (Nasdaq:DELT) (DELT) - Get Report to Hold from Buy.

Analyst Galit Sidemand set a price target of NIS 44, based on a multiple of 9 times expected 2002 earnings. The company currently trades at an 8.5 earnings multiple.

No great improvement can be expected in Delta Galil's business environment in the coming year, Sideman wrote in a research update. Some improvement in the bottom line may be expected due to cost-cutting, achieved mainly through merging activities of Wundies International and Inner Secrets. But customers will continue to press the Israeli clothing-maker and its rivals to keep prices down.

Its third-quarter results disappointed mainly because sales to the British chain Marks and Spencer continued to erode. M&S has since showed signs of recovery, though it's early days to say whether the rally will hold or how it will affect Delta Galil, Sidemand wrote.

The company is well positioned to return to growth in its mass-market and high-end offerings, and in undergarments for women. Also, its use of outsourcing allows it maximum flexibility to changing demand, she added.