Campus Activewear stock skyrockets 14% on robust Q4 results; brokerages retain buy calls

Campus Activewear stock has now advanced nearly 40 percent from its 52-week low of Rs 212.80, hit on March 28, 2024.

Shares of Campus Activewear skyrocketed over 16 percent after the company reported strong earnings for the quarter ended March 2024.

Post the earnings release, Motilal Oswal retained its ‘buy’ call on the stock with a target price of Rs 295, implying an upside of 17 percent from the previous close. JM Financial also retained a 'buy' rating on the stock, but cut the target price to Rs 295 per share.

The footwear maker's net profit jumped 42.6 percent year-on-year to Rs 32.7 crore during the quarter and revenue rose 4.6 percent YoY to Rs 364 crore. Sequentially, the bottomline of Campus Activewear rose but the topline saw a decline.

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On the operating front, Campus' EBITDA rose 16 percent YoY to Rs 66.4 crore in Q4FY24 as compared to Rs 57.1 crore in the year-ago period. Its EBITDA margin also increased to 18.3 percent in the quarter under review from 16.4 percent in the year-ago period.

Motilal Oswal's channel checks depict prolonged macro headwinds, particularly in the value segment, in the northern belt, as evident from the performances of all players, and increased competitive intensity as other players are offering low-ASP products and high channel commissions, which have led to distributor churn.

Campus’s premiumisation strategy, focusing on the Rs 1,000-2,000 ASP segment, could see headwinds in the current weak environment, where the brokerage sees down-trading across discretionary categories.

The ongoing weak environment, coupled with the churn in distributors and decline in O2O business partners, has hurt revenue growth. However, soft growth in the TD channel offset the O2O/B2B business declines. "Elevated SG&A expense will be a headwind for EBITDA margin improvement," it said.

While Campus Activewear's management refrained from giving outlook, it believes the transition phase is largely done and a combination of factors (new launches, increased brand spends, renewed thrust on mid-economy segments, consolidation of distribution channel, tailwinds from BIS implementation over long term) should help revive volume growth.

Premiumisation/ASP led growth will be lower as company has pivoted to mid/economy segment, according to JM Financial. On the balance sheet side, reduction in debt and receivables is a positive.

The company's volume delivery has lagged expectation; pace of recovery in the same and sustainability of margins will be a key monitorable for the stock in the near term, according to the brokerage.

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At 12:19 pm, Campus Activewear shares were trading 15 percent higher at Rs 289.65 apiece on the National Stock Exchange. Post today's rally, the stock has now advanced nearly 40 percent from its 52-week low of Rs 212.80, hit on March 28, 2024.

In the last one year, however, the stock has fallen around 19 percent, underperforming benchmark Nifty 50 which has risen 24 percent during this period.

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