Manyavar-owner Vedant Fashions reported a weak set of numbers for the October-December 2022 quarter, largely on the back of lower number of wedding dates. The stock took a beating on January 30 and was among the top losers in the BSE Midcap index.
At 10am, the stock was quoting at Rs 1,105 apiece on the BSE, down by 4.5 percent. It is trading below its 5-day, 20-day and 50-day simple moving averages.
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On the face of it, the numbers looks strong. Net sales for the company at Rs 441.43 crore jumped 14.73 percent from Rs 384.75 crore in December 2021. Quarterly net profit at Rs 150.35 crore, gained 17.64 percent from the year-ago period. EBITDA margin improved 108 basis points YoY to 51 percent.
But same store sales growth - a key metric for apparel and retail businesses - fell 8.7 percent in Q3 FY23 over Q3 FY22. Compared to pre-Covid levels, it grew in low single digits.
"Third quarter had significantly lower wedding dates nationally. We have witnessed very sharp recovery since January and business is progressing in line with the expectations of management," said the company in an exchange filing.
According to ICICI Securities, wedding days are now concentrated in Q4, with over 30 days compared to 10 days in Q3 FY23. "Also, the base quarter of Q3 FY22 had benefits of deferred wedding due to Covid in previous months," it said.
Thus, the sales growth of 14.73 percent was largely on the back of retail store expansion. As of December end, the company has 640 exclusive brand outlets across 242 cities. "We believe retail expansion rate has been decent, but could be accelerated further," said ICICI Securities.
The domestic brokerage firm has maintained its 'buy' rating on the stock with a target price of Rs 1,150. It is bullish on the company due to its first-mover advantage and scale efficiencies.
"A key differentiator is no discounts on Manyavar drive higher gross margin (~75 percent on end-customer sales) versus most other listed brands (which operate at 45-60 percent)," it said.
The stock is currently trading at a trailing twelve month price-to-earnings ratio of 71x.
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