Go Fashion India - Template is set, repeatability at work - initiate at BUY - ICICI Securities

Go Fashion has the first-mover advantage by launching the first exclusive bottom-wear brand 'Go Colors' in a highly fragmented bottom-wear category. We believe the brand has been able to create a replicable template of diverse product portfolio (>50 styles in >120 colours) along with a highly efficient (highest sales per square feet among peers) operating model of EBOs with pan-India presence (476 stores across 120 cities) which will potentially drive growth in medium term. Further, continued success in the new products outside of core products (churidars and leggings) is key for de-risking growth opportunities and scaling up e-commerce business. We model revenue / EBIDTA / PAT CAGR of 38% / 118% / 97% over FY22-24E. Initiate at BUY with a DCF-based target price of Rs1,300. Key risks are (1) risk of high share from Reliance Retail and (2) likely increased competition from new players entering the category.

• Store expansion: Expansion in the medium term will be focused toward existing cities (especially the top eight cities). At the same time, it plans to enter into new cities (~8-10 new cities every year). There will be continuous expansion in Tier-1 and Tier-2 with an equal importance on Tier-3 and Tier-4. We expect Go Colors to expand its EBO footprint from 476 stores as of Dec'21 to 749 stores by FY24E.
• Expand further into new sub-categories: Diverse product portfolio available in varied price ranges, styles and colours ensures that it is well positioned to cater to the needs of women of varied ages, economic backgrounds and segments. It intends to expand into loungewear, a work-from-home collection, athleisure and other new products in the ethnic, western and fusion wear segments.
• E-commerce - opportunity for new products: We believe the newer product assortment is more focused on styles and (relatively) less on colors and can be better sold online. Apart from scaling-up e-commerce sales, Go Colors intends to become a digitally relevant brand for Indian women in the bottom wear segment.
• Valuation and risk: We model revenue / EBITDA / PAT CAGR of 38% / 118% / 97% respectively over FY22-FY24E. We initiate coverage on the stock with a BUY rating and DCF-based target price of Rs1,300. Key risks: (1) risk of high share from Reliance Retail and (2) likely increased competition from new players entering the category.

Shares of Go Fashion India Ltd was last trading in BSE at Rs. 949.95 as compared to the previous close of Rs. 968.50. The total number of shares traded during the day was 3496 in over 511 trades.

The stock hit an intraday high of Rs. 964.25 and intraday low of 945.75. The net turnover during the day was Rs. 3335111.00.

Source : Equity Bulls

Keywords

GoFashionIndia Apparels INE0BJS01011 GOCOLORS ICICISecurities