Buy Arvind Fashions; target of Rs 500: Motilal Oswal

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Strong retail execution: Arvind Fashions sustained double-digit growth in 2QFY27, with revenue up 10% YoY, supported by strong retail execution and lower discounting.
  • Improving gross margins: Gross margins expanded 135bp YoY to 53.9%, driven by lower discounting, improving channel mix, and product premiumization.
  • Shift towards D2C model: Direct channels contributed 53% of revenue, with a 380bp YoY increase, supporting the shift toward a higher-margin D2C model.
  • Brand performance: US Polo continued to lead portfolio growth, while PVH brands recovered from the earlier GST disruption, and Arrow and Flying Machine progressed through repositioning.

Thesis Validation Checklist

  • Revenue growth: Arvind Fashions is expected to deliver ~12% revenue CAGR over FY26-29E.
  • Margin expansion: EBITDA margins are expected to expand ~90bp to ~9.5% over FY26-29E.
  • Cash flow generation: Arvind Fashions is expected to generate cumulative FCFF of ~INR6.2b over FY26-29E, supporting a potential re-rating. Investors should watch for these signals over the next ~12 months to see if the thesis is playing out.