Nuvama sees 41% upside in Arvind Fashions shares; here is why

Arvind Fashions shares succumbed to selling pressure on Monday even as Novuma reiterated a 'buy' call on the stock with a target that implied an upside of more than 41 per cent from its previous close. The stock declined 2.4 per cent to end at Rs 450.2 apiece on BSE.

Why is Nuvama positive on Arvind Fashions? 

Nuvama has placed its target for Arvind Fashions shares at Rs 651 apiece, stating that the company's strategy execution is well on track on the back of portfolio extension and a foray into adjacent categories which are growing at a healthy rate. The brokerage expects these extensions to provide a strong lever for growth and margin expansion. The brokerage expects demand in the fourth quarter of the current financial year to be affected and sales to start growing at a healthy pace over the next three months.

"The focus is on portfolio extension and a foray into adjacent categories which are growing at a healthy rate. We expect these extensions to provide a strong lever for growth and margin expansion," analysts at Nuvama wrote in a research report on Arvind Fashions. 

Additionally, the brokerage estimates the company's brands USPA, Arrow, Calvin Klein and TH to benefit from the ongoing premiumisation drive in the country. Premiumisation refers to customers willingly paying more for goods and services that align with their values.

While the brokerage tweaked the revenue expectations lower based on a demand slowdown. It, however, reckons better than expected margins to drive growth in earnings before interest, taxes, depreciation and amortisation (EBITDA).

"We expect a revenue/EBITDA/PAT CAGR of 11 per cent /22 per cent/45 per cent over FY23–26. Given the growth opportunities, execution capabilities, quality management, category extensions, and improved operational performance," the report read. 

Arvind Fashions Q3 performance 

Arvind Fashions, a casual and denim company, reported a multifold rise in consolidated net profit to Rs 51.08 crore for the December quarter, aided by gains from sales in its Sephora business.

Arvind Fashions shares

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