Mukul Agrawal-Backed Small Cap Stock Surges 11% After Brokerage Retains 'Buy' Call

Shares of Ethos extended gains for the second straight session on Monday going up over 11% to hit a new 52-week high of ₹3,044.

What Happened: The shares of the company are upbeat today as brokerage firm Emkay Research maintained its “buy” rating for the Mukul Agrawal-backed stock with a price target of ₹2,850. Agrawal owns a 2.61% stake in the company.

The brokerage in its note said that the watch retailer is poised for growth driven by favorable market conditions and strategic initiatives such as the Trade and Economic Partnership Agreement (TEPA) and the ramp-up of its own brand Favre Leuba (FL). The TEPA, which gradually eliminates custom duties over seven years, is expected to benefit retailers and brands, as per the analysts Ethos is well-positioned to capitalize on this opportunity.

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The analysts also noted that exclusive partnerships further strengthen Ethos’s competitive advantage, with an expanded portfolio of 45+ brands. These partnerships enable Ethos to focus on design while avoiding retailing and marketing hassles, leading to superior gross margins of 40%-45%. Ethos aims to increase its exclusive sales mix to ~45%, enhancing its moat.

Despite COVID-induced challenges, Ethos has witnessed strong growth from CY20-23, supported by domestic demand, improved customer identification measures, and enhanced shopping experiences. The brokerage added the pricing strategy for FL fills a key price gap in the market, positioning it competitively against other luxury brands.

Price Action: Ethos’ share price was up 4.66% to trade at ₹2,866.85 in early trade on Monday.

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