Arvind Fashions stock gains 18% in January so far; is this the right time to buy?
Arvind Fashions just in January, brokerage house Nuvama sees another 38 percent upside in the next 1 year. The brokerage believes the firm is perfectly positioned for a valuation re-rating. The brokerage has initiated coverage on the stock with a ‘buy’ rating and a target price of ₹660.
Arvind Fashions (ARVINDFA) has a strong portfolio of brands like U.S. Polo Assn. (USPA), Arrow, Tommy Hilfiger (TH), Calvin Klein (CK), and Flying Machine (FM).
It is into designing, sourcing, marketing, and selling a wide portfolio of branded men's, women's, and kids’ readymade apparel, footwear, innerwear, and other accessories via EBOs, MBOs, LFS, and e-commerce platforms. "Arvind Fashions choose to focus on portfolio rationalisation and operational efficiencies rather than growth. This led to better margin and return ratios.
We expect its USPA, Arrow, CK, and TH to benefit from the ongoing premiumisation drive in India. The management is focusing on portfolio extension and a foray into adjacent categories which are growing at a healthy rate. These extensions are expected to provide a strong lever for growth and margin expansion.
Given the growth opportunities, execution capabilities, quality management, category extensions, and improved operational performance, we initiate coverage with a ‘BUY’ rating and TP of ₹660," said the brokerage. The brokerage expects revenue and EBITDA CAGR of 12 percent and 22 percent (ex-Sephora) over FY23–26, led by retail footprint and margin expansion. This counter deserves a valuation re-rating given its portfolio of marquee brands, lean balance sheet, and ample room for margin expansion, said the brokerage.
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