This Athleisure Company Stock Tanked 8% In Trade, Gets A Buy

Motilal Oswal, a leading stock-broking firm, sees growth from the stock of Campus Activewear. This lifestyle athleisure brand posted muted Q4 FY23 performance on May 30. Despite weak performance, the company has a strong market position and has expansion plans, based on this the brokerage firm feels that its stock will grow by nearly 29%.

Performance of the company

Campus Activewear's 4QFY23 performance was weak. Its revenue and PAT growth stood flat YoY hit by subdued market demand, which was further worsened by an advertisement-led 50% jump in SG&A expenses that resulted in a 600bp contraction in EBITDA margin. However moderation in raw material cost was the key silver lining, which led to a 300bp improvement in gross margin (GM), Motilal Oswal suggested.

Outlook & Guidance

The company is planning to address the lower-end price point products (between Rs699-Rs999 ASP) by introducing a sub-brand under the Campus umbrella. The market size of this category is ~Rs10b. Campus's market share is ~20% in this category, which should benefit the company, as per the broking firm.
Further, it added that 2HFY23 should be the pivotal time for macro improvement. As management guided for 49-51% gross margin. As and when operating leverage kicks in, the EBITDA margin is expected to reach 20-22% in the medium term, the firm believes.

Valuation & Rating

The ongoing weak environment has hurt revenue growth for the whole industry. This was further accentuated by aggressive store rollouts and ad spending. Given the weak near-term demand outlook, aggressive footprint expansion, and marketing spending, Motilal Oswal cuts its estimates for FY24E/FY25E EPS by 12%/11%.

"We model 41% PAT CAGR as well as 19% revenue CAGR over FY23-25E and 90bp EBITDA margin improvement on FY22 base. Campus's strong market position and a long runway for growth should see recovery by 2HFY24E once the market recovers. Reiterate BUY with a target price of Rs425 (premised on 55x P/E on FY25E EPS)", it added.

Stock Price Movement

The latest stock price of this clothing brand company has plunged sharply by 8.28% to end at Rs 304.25 per share on an intraday basis. In the last one year, the share price has fallen by 17.33% within a year since its listing in 2022.

Disclaimer
The stock has been picked up from the brokerage report of Motilal Oswal. Greynium Information Technologies, the author, or the brokerage firm will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.