Campus Activewear IPO Opens On April 26: ICICI Direct Assigns 'Subscribe' Rating

Campus Activewear IPO will open for public subscription tomorrow and ahead of its opening its grey market premium as were marketmen tracking the grey market has zoomed to Rs. 85 per share.

Here are the basic details on the IPO of Campus Activewear:

Issue details: It is an offer for sale or OFS of 47,950,000 equity shares

Issue size in gross terms: Rs. 1330-Rs. 1400 crore

Bid size: 51 shares and in multiples thereof

Price-band: Rs. 278-292

Employee reservation: 2 lakh shares

BRLMs: JM Financial, BoFA Securities, CLSA India, Kotak Mahindra Capital

Registrar: Link Intime

IPO objectives: It is a pure OFS and hence the company wants to take advantages of listing the issue.

About Campus Activewear: Fastest growing sport shoes company

The company is among the fastest growing
sports and athleisure footwear brands in India, catering to approximately 85% of its total
addressable market. The company is the largest player in terms of volume (13.6 million pairs). The company registered a healthy revenue CAGR of about 20% in FY18-20 with
average EBITDA margins of about 18%. Capital efficient business model
translates into average RoCE of anyway arouund 21%.

 

Key triggers/Highlights:

- Campus has a pan-India trade distribution network with over 425 distributors servicing over 19200 retail touch points (major presence in northern region). In addition, it has an extensive online presence (D2C)
which complements the trade channel in under-penetrated geographies.
- It has a vertically integrated manufacturing process with 100% of shoe assembly operations done in house. Furthermore, it manufactures 38% of sole requirements and 17% of uppers in-house. Combination of in-house manufacturing facilities combined with integrated supply chain gives an edge over peers.
-The company caters to a wide range of price points across entry, mid and premium. Revenue contribution from premium products has increased from 31% in FY19 to 41% in 9MFY22
-For 9MFY22, the company clocked 13.6 million pair volumes (up 67%YoY) with realisations up 15% YoY to 615/pair
-The overall footwear Industry (Rs. 72000 crore) is expected to grow at a CAGR of 8% in FY20-25E whereas sports and athleisure segment (Rs. 11000 crore) is expected to increase at a CAGR of 15% during the same period.

 

Brokerage's take on the IPO and Valuations:

The company active in the footwear space caters to economic to mid-premium segment and has over the decades grown its volumes at ~20% CAGR. Replicating similar growth trajectory would be a critical factor in sustaining premium valuations. At the upper price band, the company is valued at 8x MCap/sales and ~93x P/E on TTM basis.

The brokerage assigns 'Subscribe' rating given its niche positioning in a fast growing segment, which would enable it to deliver sustainable profitable growth.

 

Disclaimer:

The view on the IPO is as assigned by the brokerage, investors and readers should conduct their own analysis before making any risky bets.

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