Ethos’s Q2 EBITDA was ~13% lower than estimate, led by a 250bps margin miss on account of INR depreciation and growth investments (higher store addition). Despite muted trends across most consumption categories, revenue growth was top-notch at 26% (19% SSG) and 300bps above our estimate. Trends have further accelerated, with 47% growth in Oct-24, along with a pickup in store adds (12 YTD and 25 expected in FY25). Addressing concerns around potential GST increase, Ethos highlighted that global brands are eager to participate in India’s long-term growth opportunity, which should drive healthy support in case of an adverse GST outcome and thus help achieve its targeted 10x topline in 10 years. With initial success in Rimowa, the outlook is robust for other luxury categories, with expected launch of Messika (jewelry) and rampup of Favre Leuba in Q4.
OutlookWe clip our TP by ~9%, due to a ~7% cut to our multiple, to factor-in the GST overhang. Given the confident commentary, we retain BUY; our TP is revised down to Rs3,350 (35x Sep-26E EBITDA).
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