Buy Arvind Fashions; target of Rs 689: Anand Rathi

Anand Rathi is bullish on Arvind Fashions has recommended buy rating on the stock with a target price of Rs 689 in its research report dated August 28, 2024.

Broker Research

August 29, 2024 / 11:02 IST

Buy

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Anand Rathi's research report on Arvind Fashions

Its FY24 annual report highlighted Arvind Fashions’ steps for growth with premiumisation being a core theme across brands. It is focusing on launching high-quality seasonal collections, which lower discounts and aid full-price sell-throughs. Adjacent categories account for >15% revenue of some brands with double-digit growth. It is prioritising expanding its retail footprint with ~150 EBOs added annually and broad base the rollout of innovative retail formats (Club A, Stride). Better stock management and higher retail channel mix reduced gross working capital y/y. The RoCE rose to ~11% (FY23: 10.6%), driven by efficient WC management, better stock control and flexible sourcing methods. Revenue/PAT of the 50% JV PVH Arvind Fashion rose ~22%/36% y/y to Rs12.4bn/1.4bn. We are enthused about the company and expect 12%/22% sales/EBITDA CAGRs over FY24- 26.

Outlook

We expect the RoCE to rise to 20.2% by FY26. To reflect the better operations, we raise our target multiple to 13x FY26e EV/EBITDA (from 12x). We retain our Buy recommendation, with a Rs689 TP (earlier Rs632).

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