Emkay Global is bullish on the stock of clothing retailer, TCNS Clothing and sees gains of upto 30% on the stock. The firm sees a price of Rs 1050 on the stock, as against the current market price of Rs 810.
What is TCNS Clothing?
TCNS Clothing is India's leading women's branded apparel company in terms of total number of exclusive brand outlets.
With an aim to provide fashion in a modern retail environment to the Indian woman, the company set up its first W store in Delhi in 2002-03. The brand grew out of contemporary Indian woman's need for innovative ready to wear that combines fashion and functionality.
|Current stock price||Target price on the stock||Per cent gains|
|Rs 810||Rs 1050||30.00%|
Solid growth rates expected
According to Emkay Global its own channel checks suggest the recovery in physical channels likely improved to 90% in Q3 vs. 65% in H2FY21/Q2FY22.
"The recovery is aided by marketing investments in 'Alia for Aurelia'/Plus-size campaigns, traction in footwear and the launch of new styles. Unlike its peers, TCNS did not see any operating cash loss in the last 18 months with lower participation in discounting during EoSS. Due to its focus on profitability and slower ethnic recovery, TCNS has lagged behind peers in terms of recovery by 10-15%," the brokerage has said.
Company aims at profitable growth
The company will be focusing on profitable growth, which is good for the bottomline. "With relatively lower discounting during EoSS and cost savings, TCNS did not see any operating cash loss (vs. significant losses for peers) in the last 18 months (FY21-H1FY22). While this has led to a slower recovery for TCNS (vs. western peers), it helped the company maintain a healthy balance sheet, unlike peers, which have raised significant capital during the pandemic," the brokerage has said.
Valuations and view
"We expect TCNS to deliver a healthy earnings CAGR of 40% over FY20-24E, led by a 12% revenue CAGR and the rest through a full margin recovery. Importantly, the scope for penetration improvement, a robust supply chain and strong online presence should help TCNS maintain earnings growth in the midteens beyond FY24. With consistent delivery, TCNS should gradually narrow down the 30- 75% valuation discount vs. peers. Reiterate Buy with a target price of Rs 1,050 on the stock (42x Dec'23E EPS)," the brokerage has said.
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