BackThis fashion stock may deliver over 80% return on long term, says Anand Rathi
Anand Rathi believes that fashion stock may surge from ₹287 to ₹526 apiece levels in long term
PremiumStock to buy today: Arvind Fashions share price has remained under base building mode since November 2022. In last one month, this fashion stock has shed to the tune of near 14 per cent whereas in YTD time, it has corrected more than 16 per cent. However, Anand Rathi believes that the fashion stocks is ready to come out of base building mode and in long term it may go up to ₹526 apiece levels. Arvind Fashions share price today is around ₹287 apiece that means brokerage is expecting more than 80 per cent rise in this stock in long term.
Highlighting the reasons for being bullish on Arvind Fashions shares, Anand Rathi says, "In line with our estimate, Arvind Fashions’ Q3 FY23 revenue grew 17% y/y; its EBITDA margin though, was lower due to higher opex. Growth was led by >12% comparable growth in its retail channel and >40% in its department stores. Operating leverage and lower discounts helped the EBITDA margin expand ~60bps y/y to 10.2%."
The brokerage went on add, "Working capital improved with Rs2bn/ 1bn/3bn reductions in stocks/receivables/payables. Stock turns at end9M FY23 were 4.2x. Ahead, management expects revenue to grow 12-15%, driven by network expansion and healthy comparable growth. With better full price sales, the turnaround in loss-suffering brands, and operating leverage, it expects margins to rise. It will continue to focus on further reducing debt and on better inventory turns, leading to more cash-flows."
On suggestion to positional investors in regard to Arvind Fashions shares, Anand Rathi said, "We raise our FY23-25e revenue ~7% on average from our earlier report. Our EBITDA is, however, ~11% lower in FY23 and ~1% higher over FY24/FY25 on average. Consistently profitable revenue growth and rising return ratios are key monitorable. We retain our Buy rating with a lower TP of ₹526, based on 11x FY25e EV/EBITDA."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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