Buy Go Fashion (India); target of Rs 1,366: Anand Rathi

Anand Rathi is bullish on Go Fashion (India) has recommended buy rating on the stock with a target price of Rs 1,366 in its research report dated July 25, 2024.

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July 26, 2024 / 13:10 IST

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26 Aug, 2025 12:21

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Anand Rathi's research report on Go Fashion (India)

Q1 revenue grew 15.8% y/y to Rs2.2bn. SSSG was 0.2% (1% in Q4 FY24; 2% in Q1 FY24). EBO sales grew 9.5% y/y to Rs 1.5bn, led by 20 net EBOs added; revenue per EBO fell 3% y/y. LFS channel sales grew 43% y/y to Rs563m, led by offers being run by one of its LFS partners; this is expected to normalise in Q2. Sales per LFS grew 14% y/y. The gross margin (incl. sub-contracting expenses) expanded 44bps y/y to 61.8%, driven by favourable RM prices. EBITDA grew 12% y/y to Rs 721m, while the margin contracted 100bps y/y to 32.8%. PAT grew 9% y/y to Rs 287m.

Outlook

Go Fashion’s Q1 revenue came in line with our estimates but the EBITDA margin was 80bps lower than ARe at 32.8%, on the 0.2% y/y SSSG as sluggish demand was further hurt by the elections and searing heat. Beneficial RM prices pushed up the gross margin 44bps y/y. Continuing efforts to improve inventory health resulted in consistently better WC days and healthy cashflows. Net cash reserve was Rs2.2bn (2bn at end-FY24). Management maintained its guidance to add 120-150 (net) stores in FY25 and targets 4-5% SSSG on the greenshoots in Jun and July. It guided to 19- 20% pre-IND AS EBITDA margin in FY25 (17.7% in FY24), driven by SSSG, cost rationalisation and better gross margins. Our FY25e/26e revenues are largely unchanged, while our FY25e/26e EBITDA is on average 1.2% lower. Promoter pledge release and SSSG improvement are key ahead. We retain our Buy, at a lower 12-mth TP of Rs 1,366 (earlier Rs 1,377), 22x FY26e EV/EBITDA.

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