Buy Campus Activewear Ltd For Target Rs.290 by Motilal Oswal Financial Services Ltd
Volume-led growth; premiumization supports ASP expansion
* Despite the festive shift, Campus’ revenue grew 17% YoY (vs. our estimate of ~15%), led by ~10% YoY volume growth and ~6% YoY increase in ASP.
* Gross margin contracted 245bp YoY (~160bp miss) due to RM inflation flowing through ahead of price hikes. EBITDA margin contracted 35bp (~35bp beat), aided by lower A&P spends. The company implemented price hikes in Oct’26 to mitigate RM inflationary pressures.
* Management retained its mid-teen FY27 revenue growth guidance and expects to deliver ~17% EBITDA margin (including other income), which implies ~18-19% margins in 2H (similar to 2HFY26), with any RM deflation providing further upside.
* We fine-tune our FY27-28 estimates and model FY26-29 revenue/EBITDA/PAT CAGRs of ~15%/19%/23%, with EBITDA margin expanding ~155bp to ~18% by FY29.
* Reiterate BUY with a revised TP of INR290, based on 33x Dec'28E EPS.
Key takeaways from the management commentary
* Guidance: Management reiterated the guidance of mid-teen revenue growth. It has guided for 17% EBITDA margin (including other income) for FY27, which implies ~18-19% EBITDA margin in 2H (similar to LY), driven by pricing, mix, and operating leverage, with any RM cost deflation providing a further upside.
* Promoter stake: The promoter family has no plans to sell its stake in the foreseeable future, addressing the recent stock overhang.
* Women’s and Kids’: Volumes grew 27%/34%, respectively, in 1HFY27, increasing their revenue contribution to 22.7% (up 100bp). Kids' category is expected to follow the growth trajectory witnessed in women’s category, led by school shoes and expansion into younger age groups and sports footwear.
Valuation and view
* Campus is expanding beyond its core category of sports shoes into sneakers, performance footwear, women’s, and kids’ categories. Sharper segmentation, affordability-led positioning and ongoing operational initiatives are supporting stronger execution and improving product mix.
* We fine-tune our FY27-29 estimate and model FY26-29E revenue/EBITDA/PAT CAGRs of ~15%/19%/23%, with EBITDA margin expanding ~155bp to ~18% by FY29.
* Further, management indicated that there is no plan for a promoter stake sale over the medium term, seeking to assuage investors’ concerns about a potential stake sale.
* We reiterate our BUY rating with an unchanged TP of INR290, based on 33x Dec’28 EPS.
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