CS maintains outperform on Arvind; GST may have one time impact

Moneycontrol BureauCredit Suisse, in its note, maintains an outperform rating on Arvind on the back of robust all-round performance. The company having joint ventures with Tommy Hilfiger and Calvin Klein, is targeting a 24 percent revenue growth. The management is hopeful of some pick-up in demand in 2HFY17. The brand performance has remained strong. In the first quarter, revenues rose 26 percent year-on-year (YoY) and EBITDA margins expanded by 50 basis points, driven by store adds, better Unlimited performance and pick up in like-to-like growth. Not just this, the management expects growth rates to sustain for FY17.However, the firm believes the Goods and Services Tax (GST) can be a risk going forward. "With no indirect taxation in textile segment and just 5 percent VAT on the branded apparel segment, either demand or margins could be impacted by GST," the report highlighted.Arvind's textile and brand segments are likely to have one-time impact owing to the implementation of GST. Currently, there is little indirect tax on the domestic textile business and the brands business attracts 5 percent VAT. "However, there are input credits related to service tax paid on rent, advertising, etc which can be netted off under GST," the report said.