Go Fashion Gets Motilal Oswal 'Buy' Initiation, Sees 31% Upside — Here's Why

Motilal Oswal initiate coverage on Go Colors with a Buy rating, as its sees the company is well-positioned to leverage its leadership in the women’s bottom-wear segment and D2C model.

Following the recent correction, Go Colors currently trades at 34x FY27E EPS.

(Source: Company's official FB page)

During FY19-25, Go Colors delivered a healthy revenue/Pre-IND-Ebitda/ PAT CAGR of 20%/19%/20%, underpinned by its Exclusive brand outlet-led expansion strategy. EBOs, contributing ~73% of revenue, posted a 22% CAGR, which was supported by a 15% CAGR in store additions.

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Motilal Oswal Report

Go Fashion India Ltd. is well-positioned to leverage its leadership in the women’s bottom-wear segment and D2C model, with significant expansion potential beyond its current presence in ~180 cities. We model a 16% revenue CAGR over FY25–28E, led by an 18% growth in exclusive brand outlet/online channels.

While its gross margin may contract ~130bp due to raw material benefit pass-through, its operating leverage is likely to drive ~135bp Ebitda margin expansion to 18.2%. Ebitda and PAT are projected to clock 19%/20% CAGR, over FY25-28E.

Strong operational cash flows are expected to result in cumulative operating cash flow/ free cash flow to the firm of Rs 3.7 billion/Rs 2.5 billion.

Following the recent correction, the stock currently trades at 34x FY27E EPS. We value the stock at 45x FY27E EPS to arrive at our target price of Rs 1,127.

We initiate coverage on the stock with a Buy rating.

Key Risks:

  1. Higher concentration on Reliance Retail (19% sales in FY24), subdued retail environment,

  2. Increasing competitive intensity,

  3. Promoter Pledge (11.3% of Equity).

Click on the attachment to read the full report:

Motilal Oswal GO Colors Initiating Coverage Note.pdf
Read Document

Also Read: Go Fashion Shares Jump After Motilal Oswal Initiates 'Buy'

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

lock-gif
To continue reading this story You must be an existing Premium User
Watch LIVE TV, Get Stock Market Updates, Top Business, IPO and Latest News on NDTV Profit.
GET REGULAR UPDATES