Arvind Fashions Ltd. has got a 'long' rating from Equirus Securities with the brokerage expecting company's profitability to improve as it starts reaping the benefits of corrective actions undertaken in the past three years.
The brokerage initiated coverage on the stock with a target price of Rs 753, implying an upside of 49%. "Additionally, supported by asset-light expansion and improved working capital efficiency, return on equity and return on capital employed are expected to reach 18.5% and 19.9%," it said.
-
Indian Markets Turning Corner After Two Tough Years, Says Sandeep Tandon -
NDTV Profit Ignite 2026: Experts See Opportunity In Equities, Stay Bullish For Long-Term -
Buy Right, Sit Tight Does Not Work for Individual Stocks, Says Dinshaw Irani -
'Worst Is Behind': Quant MF Sees Market Bottom, Flags 'Extreme Euphoria' In Midcaps -
India's Mutual Fund Industry Could Become A $1 Trillion Opportunity, Say Fund Managers -
'Foreign Investors Are Baraatis': Raamdeo Agrawal's Take On LTCG Tax -
Stay Invested Through Market Cycles: Raamdeo Agrawal at NDTV Profit Ignite -
Ramesh Damani Remains Bullish On India For Next 20-30 Years, Sees Bargains Amid Market Weakness -
CAS Came After A Long Consultation Process: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFIT IGNITE -
Aim To Cut FPI Onboarding Time From Mth To Five Days: SEBI Chairman Tuhin Kanta Pandey AT NDTV PROFI
The brokerage also finds the company's valuation attractive. "Given strong growth potential and improved profitability, we find Arvind Fashions to be attractively priced," Equirus said.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
It said, "A focused premiumisation strategy, combined with the expansion of adjacent categories (now contributing ~15% of revenues) and the turnaround of Arrow and FM brands, is anticipated to drive decent revenue growth of 10% CAGR along with substantial increase in profitability, 33% PAT CAGR by FY27E."
According to the brokerage, margin expansion should drive multi-fold growth in profitability. Fiscal 2024 margins were impacted due to premiumisation, reduced discounting, and changes in channel mix, it noted, and said operating margins too did not increase due to brand-level losses and inventory write-offs.
"With most corrective actions completed, AFL is positioned for robust growth, expecting 178 bps increase in operating margins over the next three years," according to the brokerage. "While the topline growth remains decent at 10% CAGR, Pre-IND AS EBITDA/PAT growth should be much higher at 23%/33%, led by improved gross margins, positive operating leverage, and reduced interest costs."
Key risks for its call include a slowdown in the economy and reduced discretionary spending, which could negatively impact same-store sales and overall revenue growth and issues related to licencing or royalty payments.
Increasing competitive intensity and any issues with franchisee partners could also hurt its growth prospects as the company has 60% of its store count being operated by franchisees, it said.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
