Shares of Arvind Fashions, the de-merged business of Arvind are trading higher after listing at Rs 591.75 on BSE. Arvind Fashions shares are trading at Rs 621.30 on NSE, implying a 5% rise from their listing price. Notably, AFL was demerged from parent entity Arvind Limited on November 29, 2018, and handles the branded and retail business.
AFL has power brands such as US Polo Association, Arrow, Flying Machine and Tommy Hilfiger; speciality retail brands such as Gap, Sephora and Unlimited, which are the company’s family fashion store chain, and emerging brands that include Calvin Klein, Aeropostale, The Children’s Place and Ed Hardy. According to a company presentation for the year ended March 2018, it ran 1,300 stores in 180 cities and towns.
Research and brokerage firm Axis Capital had recently initiated coverage on the shares with a target stock price of Rs 1,400 based on 17 times Mar 2021 EV/Ebitda. The target share price represents a 20% discount as compared to its listed peer Aditya Birla Fashion and Retail.
“We bake in 16 per cent revenue CAGR and 34 per cent Ebitda CAGR over FY19-21E aided by 210 basis points expansion in Ebitda margin (led by operating leverage/cost efficiency-led gains in power brands and both specialty retail and emerging brands turning profitable as a portfolio),” Axis Capital said in its report.
Anand Rathi Financial Services noted in a report that after establishing its power brands, Arvind Fashions is developing sub-brands and extensions to grow market share and retail presence. “Its largest brand, US Polo Association, is the best example of category expansion driving revenue growth,” Anand Rathi Financial Services noted.
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