Buy Ethos; target of Rs 3200: Emkay Global Financial

buy

Emkay Global Financial' research report on Ethos

We came out of Ethos’s investor summit with renewed confidence on the company’s 10x scale-up opportunity over the next decade; hence, we reiterate BUY. In our view, Ethos’s ‘ahead-of-the-curve’ investments in people, luxury real estate, and strengthened balance sheet (Rs8bn cash) should benefit it in the long term. Ethos expects minimal disruption from the ongoing war in the Middle East (ME), as it continues to see robust growth trends, along with no major supply chain disruption. Also, margins have tangible tailwinds in terms of gradual elimination of customs duty, lower discounting, and ramp-up of recent luxury locations (Mall of Asia/City of Times), though near-term margins are likely to be hit by continued CHF-INR depreciation. The expansion pipeline remains robust, with target to open ~100 boutiques over the next 3-4 years. Ramp-up of non-metro stores is on expected lines and will drive 75-80% of the targeted expansion. In addition, Favre Leuba has seen a better-than-expected launch, with ~6,000 pieces sold in year-1 (ASP: ~Rs350k). Lifestyle segment is seeing strong initial traction for Rimowa and Messika.

Outlook

Ethos’s valuations at 40x/30x FY27E/FY28E EPS are attractive, given strong ~30% earnings CAGR over FY26-28E. We reiterate BUY, with TP of Rs3,200 (30x Dec-27E EBITDA).

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Ethos - 1803026 - emkay