Buy Aditya Vision; target of Rs 550: Emkay Global Financial

BUY

Emkay Global Financial's research report on Aditya Vision

AVL’s Q3 EBITDA was 9-14% below street/our estimates, due to weaker gross margin in a sluggish demand environment. In the wake of significant growth moderation for the durable industry in Q3 (vs H1), AVL’s strong and in-line revenue growth of 23% marks a huge outperformance (13%/15% SSG in Q3/9M). While industry trends remain bleak in Q4TD, AVL expects growth to revive strongly on the back of expected increase in disposable incomes with Maha-Kumbh, and its growing presence in the Hindi Heartland—which sees a longer and harsher summer season. Reflecting this, AVL has already started stocking inventory to avoid supply-chain disruptions and remains on track to open ~30 stores in FY25 (vs 145 stores at FY24-end). In our view, ramp-up of newer states (UP/Jharkhand) is on track,

Outlook

With ~8%/11% revenue mix in 9M (~16%/17% of network). While we cut our earnings/TP by 6-8% on the Q3 miss and growth investments, we maintain BUY on AVL (TP: 550 now; 40x Dec- 26 EPS), due to outperformance and deep under-penetration in its regions.

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