Mutual funds' favourite stock now available at 30% discount from life high: Should investors buy or wait? Analysts answer

Available at a discount of around 30 per cent from its all-time high, several analysts have a ‘buy’ rating on this favourite stock of mutual fund houses. They believe the stock may surge up to Rs 400 per share or 42 per cent on a long-term basis amid strong business outlook.

Go Fashion (India) shares witnessed buying interest in the last hour of Wednesday’s trading session. The stock settled at Rs 959 per share, up Rs 14.55 or 1.54 per cent from the previous day's closing.

The speciality retail stock made a stellar market debut in November 2021 at Rs 1,316 per share as compared to its issue price of Rs 690 on the exchanges. Almost a year after listing, the counter hit a lifetime high of Rs 1,450 per share on the BSE.

Why are analysts bullish on Go Fashion?

Go Fashion, through its exclusive focus on women’s bottom-wear category, has excelled in three critical aspects – sourcing and managing a wide range of SKUs (stock-keeping units), innovation and store economics, according to Mehul Desai, an analyst at JM Financial.

The company's expertise in these three aspects is visible from its large portfolio scale which are far bigger than the competition, improving share of value-added products and superior store economics, according to Desai, who maintains a ‘buy’ rating with a target price of Rs 1,360 apiece, implying 42 per cent upside.

Similarly, Devanshu Bansal of Emkay Research is upbeat on Go Fashion as he expects the company’s earnings to double by FY26E on the back of a near doubling of revenue and gradual margin gains. And, this high double-digit revenue growth will likely continue for several years beyond FY26, he added.

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“We also expect Go Fashion to be far more immune to an unfavorable macro, as distribution-led share gains are relatively easier to attain for an incumbent leader,” the analyst at Emkay said, adding that the company has first-mover advantage, which leads to superior store-level. It has given a 'buy' call with a target of Rs 1,220 apiece.

Go Fashion: Share Price History

Since listing in November 2021, Go Fashion has corrected by around 23 per cent. The stock has grown marginally by 6 per cent in the last one year as compared to the flat Nifty50 index.

Price Chart Go Fashion vs Nifty

So far this year, Go Fashion shares were down nearly 18 per cent and it has corrected more than 25 per cent in six months.

Mutual Funds' "Favourite Stock"

As many as half a dozen mutual fund houses have picked up Go Fashion shares, as of December 2022, according to the shareholding pattern of the company. MF houses such as Axis Mutual Fund, Kotak AMC, Aditya Birla Sun Life AMC and SBI AMC among others have stakes in the company.

Chart

Besides, SBI Life Insurance holds its 11,41,390 equity shares or 2.11 per cent stakes. Sequoia Capital India – venture capital company – also held 54,98,875 shares of over 10 per cent stakes in the women-bottom-wear maker, as per shareholding pattern available on the BSE.

As of last month, 13 mutual fund houses bought and five sold Go Fashion shares, according to the stock analysis portal Trendlyne. Aditya Birla Sun Life Equity Advantage Fund Growth was the highest buyer of 150,000 shares in Feb 2023 constituting 0.28% of the paid-up equity of the company.

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