Buy Ethos; target of Rs 3300: Emkay Global Financial

Buy

Emkay Global Financial's research report on Ethos

Ethos’s Q4 EBITDA is in-line, with margin up by 80bps offsetting the 6% miss on revenue. Despite this, revenue growth was a decent 23%/25% in Q4/FY25, led by SSG of 17.4% in FY25 and by new store additions. Notably, Q4 growth was led by volume, as Q4 realization fell ~3%. Gross margin (GM) inched up by ~180bps, likely helped by correction in the pricing mis-match with MRP revision at start of the year. Store adds were lower at 1/14 in Q4/FY25, but are expected to pick-up with 8 store openings in May-25. WC increased by ~20days, on likely inventory planning for 8 new openings (up by 12days) and reduced payables (9days less). In line with Q4 trends, we cut revenue estimate by ~3%, offset fully by a better margin profile.

Outlook

We retain BUY and TP of Rs3,300 (30x FY27E EBITDA). The earnings call is on 14-May (4pm); we will keep a lookout for 1) growth prospects in the wake of a weak macro (volatile stock market); 2) fall in realization despite likely price hike in Q4; 3) the improved GM sustaining; 4) traction for launch of new brand Favre Leuba; 5) break-up of WC/capex investments between stores opened in FY25 and WIP stores for FY26.

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Ethos- 06052025 - emkay