Ethos stock attractive within the small-cap space, says Axis Securities; sees nearly 30% upside
Ethos, one of India’s leading luxury and premium watch retail players, are set to cross the ₹3,000 mark from their current market price of ₹2,370 apiece, according to projections by domestic brokerage firm Axis Securities. Axis Securities believes that Ethos is well-positioned, as the luxury market in India is expected to expand fivefold in the next decade. This growth is attributed to the increasing number of affluent consumers in the country with higher aspirations and disposable income.
The brokerage highlighted the recent surge in sales of luxury products across various luxury segments, indicating a thriving market for Ethos in the evolving luxury landscape. Also Read: Rail stocks RVNL, IRFC, IRCON jump up to 15% to new highs; soar up to 75% just in Jan ahead of Budget In its latest report, the brokerage underscored Ethos's strategic moves, including its entry into the fast-growing Certified Pre-Owned (CPO) segment, an increase in the share of high-margin exclusive brands in its portfolio, and diversification into other rapidly expanding luxury segments such as luggage (Rimowa) and jewellery (Messika and Bvlgari). Ethos is foraying into the fast-growing Certified Pre-Owned (CPO) segment due to the shortage of new luxury watches, which is a step in the right direction.
CPO is an asset-light model. It has a lower Capex and requires a lower working capital cycle of 50–60 days vs. 140–150 days for new watches.
As a result, it has a higher ROCE of 20%+ vs. 15–18% for new watches, the brokerage said. An increasing share of high-margin exclusive brands in the portfolio is expected to drive the overall margin profile, given that these brands command 2x gross margins (35–40%) compared to non-exclusive brands.
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