Arvind Fashions share price has been on a roll in November so far. Arvind Fashions share price has surged almost 35 per cent in November so far while the Sensex has gained nearly 5 per cent. Year-to-date, Arvind Fashions share price is up over 24 per cent while the Sensex has gained about 10 per cent.
Despite such sharp gains this month, the stock may have some steam left.
Brokerage firm Antique Stock Broking initiated coverage on the stock with a buy recommendation, pegging the target price of ₹565, implying a 31 per cent upside.
“We initiate coverage on Arvind Fashions with a buy recommendation and a target price of ₹565 (valuing it at 10 times H1FY26 EV/EBITDA; 16 times H1FY26 pre-IND AS EV/EBITDA),” Antique said in a report on Thursday, November 30.
Antique observed that Arvind Fashions’ business strategy revolves around five key brands that have the possibility of category expansion and the potential to deliver across its distribution reach in even tier 2 and tier 3 towns.
The brokerage firm pointed out that over the past 18-24 months, the management has taken various corrective actions across its product portfolio to drive long-term growth. Arvind Fashions has a very strong portfolio of brands in the fast-growing casual wear category that has a high recall value.
According to the brokerage firm, the focus will be on scaling up existing brands profitably and not adding new ones over the next two to three years.
Antique believes the company is well-placed to revive/scale up brands like Arrow, Tommy Hilfiger, Calvin Klein and Flying Machine backed by an experienced management team, as showcased in the case of US Polo Association. The company is expected to focus on aggressively expanding its network through franchisees.
“We expect revenue, EBITDA and PAT to grow at 9 per cent, 20 per cent and 52 per cent CAGR, respectively, over FY23-26E with improvement in return ratios and cash flows. Working capital is expected to further improve with better inventory turns,” said Antique.
Antique believes the company is well-placed to revive/scale up brands like Arrow, Tommy Hilfiger, Calvin Klein and Flying Machine backed by an experienced management team, as showcased in the case of US Polo Association. The company is expected to focus on aggressively expanding its network through franchisees.
“We expect the company to turn net debt-free in the next two to three years. At the current market price, Arvind Fashions trades at an EV/EBITDA valuation of 8.6 times and 6.6 times for FY25E and FY26E respectively (15 times and 12 times FY25 and FY26e pre-Ind AS EV/EBITDA respectively),” said Antique.
Source Link: Arvind Fashions share price up 35% in November; Antique sees further upside; here's what the brokerage says | Mint