What makes this Sunil Singhania, Mukul Agrawal portfolio stock attractive? Analyst sees Rs 250 upside

Ethos Limited – India’s largest luxury and premium watch retailer – has the potential to grow by around 25 per cent or Rs 250 apiece on the back of a healthy business outlook, domestic brokerage HDFC Securities said in its fundamental analysis report after the company’s Q3 results.

On Wednesday, Ethos shares closed in the red, down nearly 1 per cent to Rs 985 per share on the BSE.

Ethos: Investors’ favourite stock

Ethos, which has a sizeable portfolio of premium and luxury watches, including brands like Rado, Rolex, and Tissot, is one of the favourite stocks of ace investors Sunil Singhania and Mukul Agrawal.

As per the latest shareholding pattern, Singhania through his asset management firm holds 3,02,663 equity shares or 1.30 per cent stakes in Ethos, while Agrawal has 8,09,646 shares or 3.47 per cent holdings in the premium watch retailer.

As of February 15, 2023, Singhania publicly holds 27 stocks with a net worth of over Rs 2,104.4 crore, while Agrawal has 56 stocks with a net worth of over Rs 2,769.2 crore, as per Trendlyne.

Ethos may surge by 25% or Rs 250 apiece

Ethos’ growth shall be driven by improvement in realisation and same-store sales growth (SSG) rate with new store additions, and increasing contribution from certified pre-owned business, Harsh Seth, analyst at HDFC Securities, said while maintaining a positive stance on the counter with a target of Rs 1,227 apiece.

Image Source: HDFC Securities

“The long-term growth tailwinds for the luxury watch industry in India coupled with Ethos’ dominant position in the luxury retail watch market makes Ethos an attractive long-term bet,” Sheth added.

The analyst further pointed out that favourable long-term macroeconomic factors, a portfolio of best-in-class brands, and management’s strong execution track record should lead to higher operating efficiencies over the medium to long term.

Image Source: HDFC Securities

Ethos Q3 Earnings

In the December quarter of this fiscal, Ethos recorded its highest-ever quarterly revenue and profit after tax (PAT) on the back of robust demand and focused marketing initiatives. While its Same-Store Sales Growth (SSG) for the quarter stood at 16 per cent.

Image Source: HDFC Securities

EBITDA margins expanded on a year-on-year basis amid cost optimisation initiatives and operating leverage benefits, similarly, the omnichannel strategy has resulted in strong growth offline as well as online.

Ethos Share Price History

Nearly eight-month-old listed stock has grown more than 32% since its market debut in June 2022. The counter has declined by over 10% in the last six months against a 2% rise in the S&P BSE Sensex.

Image Source: Stockedge

The scrip is trading at a discount of around 14 per cent from its 52-week high of Rs 1,145.35 per share, which is also seen as resistance for the further rally in Ethos’ share price.