BackAnand Rathi bullish on this multibagger stock, raises target price
The brokerage house has a Buy rating on the multibagger stock Arvind Fashions comes and revised target price upwards
PremiumWith major headwinds for Arvind Fashions now past, brokerage house Anand Rathi expects a revival in growth and better margins in its key power brands, which account for 80%+ of its revenue and almost all its EBITDA. Hence, brighter prospects make the brokerage upbeat on the company.
"Ahead, it will concentrate on its six focus brands, optimise working capital via better inventory turns, and expand its network through franchisees. We expect more cash generation and better return ratios, and debt to shrink," the broker note stated.
Anand Rathi's Buy rating on the multibagger stock comes with revised target price of ₹470 ( ₹427 earlier). Shares of Arvind Fashions have surged over 108% in a year's period, whereas it is up around 68% in the last six months.
"With fund raising and strategic investment in FY21, debt was reduced by ₹4 billion year-on-year (YoY) to ₹9.4 billion. In H1FY22 it further shrank to ₹8.4 bn, and we expect it to come down to ₹6 bn by end-FY22," the note added.
With the Power brands margin rebound, and exiting the loss-suffering brands, it expects overall profit to turn around significantly over FY23-24. The brokerage also expects net debt/equity of 0.1x by FY24 aided by better cashflows, optimised working capital and profitable revenue growth.
“Internal strategies (one-time MBO channel correction) and external factors (Covid-19) led to their performance declining in FY19-21. On its strategic steps—expansions and category, continued investments in omni-channel capabilities and benefits of the post-Covid’19 casualisation trend—we expect a 13% revenue CAGR (compound annual growth rate) over FY20-24." Though, Anand Rathi sees keen competition, lower revenue growth due to Covid-19 as key risks.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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