Buy Vedant Fashions; target of Rs 1400: Motilal Oswal

Motilal Oswal is bullish on Vedant Fashions recommended buy rating on the stock with a target price of Rs 1400 in its research report dated March 30, 2023.

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March 30, 2023 / 10:54 IST

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Motilal Oswal's research report on Vedant Fashions

Vedant Fashions (VFL), with a pan-India presence covering 250 cities and 640 stores, has established itself as a strong brand within the highly underpenetrated and unorganized ethnic wear segment (~20% branded). Limited competition, growing cultural pull and strong brand recall present a huge runway of growth for VFL. The company’s: a) strong design capabilities with data-driven decision making (leading to no discounted sales), b) tech-driven supply chain and auto replenishment model c) exclusive vendor ecosystem, and d) franchisebased EBO expansion have helped scale up its business and achieve superior margins. Scaling-up emerging brands (especially Mohey; ~10% of revenue), and catering to the sizeable women’s celebration wear market (~5x the size of men’s segment at INR735b as of FY20), can be the key growth levers with improving operating metrics and plans to add independent stores. Further, expanding a) Twamev through up-selling and b) Manthan to capture the value fashion segment could underpin revenue growth moving ahead.

Outlook

We expect the company to report a revenue/PAT CAGR of 21%/22% over FY23-25, driven by 15% footprint additions. We ascribe a forward P/E of 55x, at ~10% premium to our average retail coverage multiple, to arrive at our TP of INR1,400. We initiate coverage on the stock with a BUY rating.

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