Campus Activewear Q4 Results Review - Muted Demand And High Opex Dent Margins: Motilal Oswal

• Campus Activewear (Campus)’s 4QFY23 performance was weak. Its revenue/PAT growth stood flat YoY hit by subdued market demand, which was further worsened by advertisement-led 50% jump in SG&A expenses that resulted in 600bp contraction in EBITDA margin. Moderation in RM cost was the key silver lining, which led to 300bp improvement in gross margin (GM).

• Given the weak near-term demand outlook, aggressive footprint expansion and marketing spends, we cut our FY24E/FY25E EPS by 12%/11%. We model 41% PAT CAGR as well as 19% revenue CAGR over FY23-25E and 90bp EBITDA margin improvement on FY22 base. Campus’s strong market position and a long runway for growth should see recovery by 2HFY24E once market recovers. Reiterate BUY with a TP of INR425 (premised on 55x P/E on FY25E EPS).

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