Motilal Oswal Initiates Coverage On This Midcap Stock With "BUY" For 27% Gains

Motilal Oswal Financial Services initiates coverage on Vedant Fashions Ltd. with a "Buy" for a target price of Rs 1,400 apiece. It claims a potential upside of up to 27% if purchased at the current market price. Vedant Fashions is a Speciality Retail sector company that caters to the Indian celebration wear market with a diverse portfolio of brands. The company markets its products under the brand name Manyavar, Mohey, and Mebaz. It is a midcap company with a market valuation of Rs 26,808.63 crore.

Vedant Fashion - Stock Overview

The stock of Vedant Fashions last traded at Rs 1,104.35 apiece. The stock traded the 52 week low on 30 March 2022 at Rs 888.70 apiece, and 52 week high on 6 October 2022 at Rs 1,501.55 apiece, respectively. It was listed on 16 February 2022 on the stock exchange.

In the past 1 week, it has fallen 1.91%. In the past 1 month, it has fallen 8.25% and in the last 3 months, it has fallen 16.4%. In the past 6 months, it has fallen 21.62%. The stock has given 17.43% positive return in the past 1 year. Since its listing date, it gained 18.3%.

Warrants rich valuation! Initiate coverage with a BUY rating on the stock

According to Motilal Oswal Financial Services, The stock is trading at P/E and EV/EBITDA of 42.8x and 27.2x on FY25E, respectively. The Indian ethnic wear business is a difficult business to replicate, given its high customer needs and complex inventory management. This gives VFL an inherent competitive advantage. It has: a) a large-scale multi-year growth opportunity, b) no intense competition, and c) strong margin and ROCE profile. Further, VFL's franchisee model ensures limited store-related investments and working capital needs. Notably, the management's disciplined growth approach, as evident from Mohey and Twamev's gradual scale-up, has ensured it does not face the risk of bloated working capital and aggressive write-downs, which can hamper its profitability and retract scale. "We expect the company to report a revenue/PAT CAGR of 21%/22% over FY23-25, driven by 15% footprint additions. We ascribe a forward P/E of 55x, at ~10% premium to our average retail coverage multiple, to arrive at our TP of INR1,400. We initiate coverage on the stock with a BUY rating," the brokerage has said.

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