Weak market condition and high ad spent continues

Company
11 Mar 2024
5 Min read 
  • Campus Activewear's revenue remained flat YoY, recovering from a weak performance in 2QFY24.
  •  The company experienced a decline in EBITDA margins due to high SG&A expenses.
  •  Potential earnings vulnerability is expected in the next few quarters, leading to a decrease in EBITDA/PAT estimates for FY25.
  •  Despite the stock's significant correction, Campus Activewear's market position and growth opportunities suggest a potential recovery in FY25.
  •  The company lost market share in UP/Bihar but gained market share in other states.
  •  Marketing spend increased in 3QFY24, driven by events like big billion days.
  •  The company has repaid debt and reduced working capital days.
  •  Campus Activewear is focusing on recovering lost volumes in O2O/B2B channels and expanding its marketplace segment.
  •  The company's premiumization strategy may face headwinds due to the economic downturn and customer downgrading.
  •  EBITDA and PAT declined YoY due to higher SG&A expenses.
  •  The company's performance aligns with market sentiments in the FMCG sector.
  •  Gross margins and volume declined YoY, while ASP increased.
  •  Financial estimates for FY24 and FY25 have been adjusted, with a revenue/PAT CAGR of 14%/40% over FY24-26E.
  •  The company's valuation is based on a 55x PE on FY26 EPS.
  •  Key takeaways from management commentary include revenue recovery, market share changes, and the current market environment.
  •  Financial ratios and cash flow statements provide further insights into the company's financial performance.
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