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Brand Exclusivity and Premiumisation: Strengthening the Luxury Retail Moat

Ethos has built a differentiated position in India's organised luxury watch market through scale, exclusive brand relationships and premiumisation, with 103 stores and over 85 brands, including 64 exclusive brands (Favre Leuba, Jacob & Co, Bell & Ross, Bovet, Corum, H. Moser & Cie etc.) as on June-26. The portfolio continues to premiumise, with ASP rising from INR 149,000 in FY22 to INR 226,000 in Q1FY27 as luxury and high luxury mix increased from 65% to 71%. Exclusive brands account for around 30% of total sales and offer higher margin, strengthening both differentiation and profitability. Certified Pre Owned (CPO) watches adds another layer of moat through sourcing, authentication, refurbishment and specialised watchmaking capabilities in a largely unorganised market. Ethos is also extending its portfolio to other luxury categories, including luggage and jewellery, creating optionality beyond watches.

Growth Runway: Store Expansion, Premiumisation and New City Penetration

Ethos has a long runway for store expansion, with the network expected to increase from 103 stores to 169 by FY29E, while management targets ~200 stores over the next 3 to 4 years. We expect store additions to remain a key growth driver, supported by larger formats, better locations and broader brand assortments, which should improve store productivity. Rising ASPs and premiumisation should support ~13% SSSG through FY29E. The company is also expanding into underpenetrated Tier 2 and Tier 3 cities, where increasing luxury consumption and limited organised retail presence provide further growth opportunities.

Network Expansion to Drive Growth and Margin Expansion

Ethos is transitioning from a SSSG led growth model towards a more balanced growth strategy driven by network expansion, healthy SSSG and premiumisation. SSSG moderated to ~14.2% in FY26 and 13.2% in Q1FY27, from ~17% in FY25, as the company accelerated store additions. With management targeting ~200 stores over the next 3 to 4 years and aspiring to deliver 10x revenue by FY32 under its Road to 10x strategy (2022- 2032), we see a long runway for network led growth. We estimate ~13% SSSG and ~22% store count CAGR through FY29E, supporting ~26% revenue CAGR. As the newer stores mature, front ended expansion costs should normalise, while operating leverage, cost discipline, stable CHF/INR and calibrated price increases should support margin expansion, with EBITDA margin increasing from 12.9% in FY26 to 14.4% by FY29E.

Valuation and View:

Ethos offers a strong medium to long term growth opportunity, driven by store expansion, premiumisation and increasing contribution from exclusive brands. The company is also expanding into other luxury categories, including luggage and jewellery, providing optionality beyond watches. Store additions, healthy SSSG and operating leverage should support Revenue, EBITDA and PAT CAGR of 26%, 30% and 33%, respectively, over FY26 to FY29E. We initiate coverage with an ‘ADD’ rating and a TP of INR 3,050, valuing the stock at 40x Sep-28 EPS, implying 17% upside from the current level.

Upside Triggers:

(a) Faster store rollout and higher store productivity, with Ethos reaching the targeted ~200-store network ahead of expectation and newer stores scaling up faster than estimated

(b) Sustained premiumisation and higher ASPs, supported by increasing luxury and high luxury mix, deeper wallet share and higher contribution from exclusive brands

(c) Faster scaling up of CPO and luxury lifestyle categories, particularly RIMOWA and Messika, along with addition of new marquee luxury brands, creating incremental growth beyond the core watch business.

Key Risks:

(a) Increasing competition from direct brand entry and new luxury retailers

(b) slower store rollout or weaker productivity in new stores, particularly in Tier 2 and Tier 3 cities, due to location availability and longer ramp up periods

(c) SSSG moderation and slower premiumisation

(d) currency depreciation and rising operating costs, which could limit EBITDA margin expansion.

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