Vedanta Fashion’s (VFL) strong design capabilities along with data-driven decision making (with no discounted sales), technology-driven supply chain and auto replenishment model, exclusive seller ecosystem, and franchisee-based EBO expansion have fueled its business Helped to grow and achieve Better margins, higher domestic brokerage Motilal Oswal in its report.
The brokerage has initiated coverage on the stock with a ‘Buy’ rating and with A target price Of 1,400, suggesting a potential upside of 27 per cent from current market levels.
inventory VFL is trading at P/E and EV/EBITDA of 42.8x and 27.2x respectively for FY 25E. Motilal Oswal credits its forward P/E of 55x on the 10 per cent premium to our average retail coverage multiple for arriving at its TP.
The brokerage expects the company to report a revenue/Pat CAGR of 21 per cent/22 per cent over FY2023-25, driven by 15 per cent footprint additions.
Shares of Vedanta Fashion rose by 5%
Shares of Vedanta Fashion Limited closed up 3.23 percent. 1,140 in Friday trade at Rs. Share touched intraday high 1,165, rose 5.36 per cent on the BSE after Motilal Oswal initiated coverage on the ethnic wear company.
The stock gained 14 per cent in one year, but declined 14.56 per cent since the start of 2023. Vedanta Fashion’s market capitalization stood at 27,700 crore on BSE.
The stock reached a 52-week low 898.95 and 52 week high on March 30, 2022 1501 on October 6, 2022.
Key Growth Levers
scaling-up emerging brands notably Mohe; 10 percent of revenue, and cater to a women’s festive apparel market that is 5 times the size of the men’s section. 735 billion as of FY20, with improvement in operating metrics and plans to add independent stores could be key growth levers.
Moreover, Tvamev’s expansion through up-selling and churn to capture the value fashion segment could further drive revenue growth.
The Indian ethnic wear business is a difficult business to replicate, given its high customer requirements and complex inventory management. This gives VFL an inherent competitive advantage.
It has massive multi-year growth opportunity, no intense competition, and strong margin and ROCE profile.
Furthermore, VFL’s franchise model ensures limited store-related investment and working capital requirements.
Notably, the management’s disciplined growth approach, as evidenced by the gradual expansion of Mohe and Tvmev, has ensured that it does not face the risks of bloated working capital and aggressive write-downs, which could impact its profitability and growth. Can inhibit the scale of retreat.
The views and recommendations given above are of individual analysts or broking companies and not of Mint,
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