Small Cap Stock Is Down 5% Today, But Analysts See A 47% Rally Ahead

Shares of Arvind Fashion have been volatile since the company reported its earnings for the quarter ended December. However, analysts at Nuvama remain positive on the stock’s long-term prospects.

The Arvind Fashion Analyst: Palash Kawale for Nuvama maintained the “buy” rating for the stock with a target price of ₹651. The target reflects an around 47% upside from the stock’s current market price of around ₹440.

The Arvind Fashion Thesis: The brokerage firm said that the company’s revenue for the quarter missed its estimates due to lesser discounting which resulted in a loss of sales and sluggish demand. Another reason behind the slow growth was the tepid demand environment.

Particulars	Q3FY24	Q3FY23	Change (%)
Income from operations	1,125	1,073	4.9
EBITDA	137	112	22.4
EBITDA margin (%)	12.2	10.4	174bp
Profit after tax	51	26	93.6

However, the analysts highlighted that the company’s sharp focus on margin enhancement is driving healthy expansion. Rather than prioritizing growth, management is emphasizing portfolio rationalization and operational efficiencies. The brokerages anticipate that demand in the March quarter will be impacted, with sales poised to pick up at a healthy pace starting from the June quarter.

The analyst foresees brands such as USPA, Arrow, Calvin Klein, and Tommy Hilfiger benefiting from the ongoing premiumisation trend in India. The company’s strategy includes extending its portfolio and venturing into adjacent categories experiencing robust growth. These expansions are expected to serve as strong catalysts for both growth and margin expansion.

Price Action: Arvind Fashion’s share price was down 4.62% to trade at ₹440 in early trade on Monday.

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