Buy Go Fashion India; target of Rs 305: Anand Rathi

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Store Network Consolidation: Go Fashion plans to convert its smaller format stores (<300 sq. ft.) to large format stores (700+ sq. ft.) over the medium term, which is expected to improve profitability.
  • Gross Margin Recovery: The company expects a recovery in gross margin over the next two quarters, supported by calibrated price hikes, despite higher raw material costs.
  • Daily Wear Pilot Expansion: The daily wear pilot has been expanded to 21 stores and is expected to reach 25-30 stores by FY27-end, which could contribute to revenue growth.
  • Valuation: The stock trades at 27.4/19.5/13.4x of FY27/28/29e P/E, which is considered reasonable.

Thesis Validation Checklist

  • Store Closure Pace: A slowdown in store closures from Q3FY27 onwards, with 15-20 closures estimated for Q3FY27.
  • Gross Margin: A recovery in gross margin over the next two quarters, supported by calibrated price hikes.
  • SSSG: A positive SSSG by FY27-end, driven by the expansion of large format stores and the daily wear pilot.
  • Balance Sheet: Maintenance of a strong balance sheet, with a net cash position of Rs2.1bn as of Sep-26.