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Campus’ revenue growth was robust, rising 29% YoY to INR 3.3bn on the back of strong volume growth (36% YoY) led by 5% YoY fall in ASP. EBITDA was up ~56% YoY as margin expanded ~200bps YoY to 52.4%. Margin expansion would have been even higher if not for gross margin contracting ~200bps YoY due to (i) higher schemes and promotions in the distribution channel towards retailers’ meet, and (ii) liquidation of non-BIS inventory. Other expenses were higher by 16% YoY due to (1) phasing of performance marketing spends and (2) higher online commission. In terms of channel mix, trade distribution channel and D2C online sales grew by ~36% YoY each, while D2C offline sales grew 6% YoY. 3Q has started on an encouraging note led by festive demand; this, coupled with multiple management initiatives such as (i) new launches, (ii) increased brand spends, (iii) renewed thrust on mideconomy segments, and (iv) consolidation of distribution channel should help sustain revenue recovery. Margins and ASP are expected to improve from 2H led by higher share of closed footwear in the mix and lower channel discounts. We increase our EPS estimates by 1-4% for FY25-27E factoring in better-than-expected volume-led performance in 2Q. We maintain our BUY rating on the stock with a revised target price of INR 340 (50x Dec-26E EPS – Pre Ind AS).

* Strong revenue performance; margins impacted: Campus’ sales grew by 29% YoY to INR 3.3bn led by 36% YoY volume growth as ASP declined by 5% YoY. EBITDA margin expanded 200bps despite gross margin contracting by ~200bps YoY to 52.4% as other expenses and employee expenses shrank ~350bps and ~50bps YoY respectively. Gross margin was impacted on account of higher distributor schemes and mark-down on nonBIS inventory. PAT increased 45x YoY to INR 143mn led by higher other income (8x increase YoY to INR 34mn) and lower interest (31% decline YoY) and depreciation expense (3% decline YoY).

* Trade distribution channel witnessed robust growth; EBO sales tepid: Volumes in 2Q grew by 36% YoY to 5.4mn pairs while ASP declined by ~5% YoY to INR 622/pair due to (i) higher schemes/promotions in distribution channel, and (ii) liquidation of non-BIS inventory. Trade distribution value grew 36% YoY led by 44% volume growth, while D2C offline sales grew only by 6% YoY. D2C online revenue grew by ~36% YoY led by strong B2B online sales while market place grew only by 9%.

* 3Q demand outlook robust; margins to recover in 2H: Revenue growth in 2Q remained robust and the management expects demand momentum to sustain in 3Q and beyond led by multiple initiatives towards (1) Channel consolidation and placement of focus products, (2) marketing/branding initiatives and (3) encouraging festive demand. Although margins were impacted in 2Q, they are expected to revive from 3Q onwards due to upfront expenses on marketing and online commission sales, which will be accounted in 3Q. In addition, higher operating leverage should also aid overall margins.

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