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.
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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:
Higher concentration on Reliance Retail (19% sales in FY24), subdued retail environment,
Increasing competitive intensity,
Promoter Pledge (11.3% of Equity).
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