Buy Campus Activewear Ltd for the Target Rs 305 by Motilal Oswal Financial Services Ltd
Premiumization and brand extensions to drive growth and margin expansion
We attended Campus Activewear’s (CAMPUS) distributor meet and came away constructive on the company’s efforts to diversify beyond its core sports shoe proposition into a lifestyle brand (spanning semi-formal footwear, open footwear, and apparel). Channel feedback on the new portfolio was positive. Further, we note that CAMPUS has taken a sharp (~14%) price hike to mitigate the adverse impact of input cost inflation and cushion margins, while dealers’ incentives have been aligned to volume growth rather than purely value growth. We reiterate our BUY rating on CAMPUS with an unchanged TP of INR305.
Repositioning the brand into lifestyle categories
* CAMPUS is gradually evolving from a core sports shoe brand toward a broader family lifestyle portfolio, with an increasing focus on sneakers, semi-formals, open footwear, women’s, and kids’ categories.
* The newly launched Elan range marks the company’s entry into lifestyle and semi-formal footwear, expanding the brand beyond athletic usage into everyday wear occasions. Retailers highlighted improving traction in the newer lifestyle assortment.
* Channel checks indicate a meaningful increase in assortment depth and display allocation for women’s and kids’ categories, reflecting CAMPUS’ focus on improving family-level wallet share and reducing dependence on men’s footwear.
* Sharper segmentation across running, walking, sneakers, and lifestyle categories is improving merchandising clarity and product relevance across Tier-2/3 markets.
E-commerce pricing differential concerns have partly abated
* Channel feedback on execution remains positive, particularly around servicing quality, replenishment, and inventory availability. However, larger distributors are seeing rising working-capital pressure amid elongated receivable cycles and scheme-led growth.
* E-commerce discounting remains a concern for offline retailers and continues to weigh on premium perception, although distributors indicated that discount intensity in e-commerce has moderated (vs. levels seen 2–3 years ago).
Valuation and view
* CAMPUS is expanding beyond its core category of sports shoes into sneakers, women’s, and kids’ categories. Sharper segmentation, affordability-led positioning, and ongoing operational initiatives are supporting stronger execution and an improving product mix. Channel feedback on execution remains stronger vs. peers.
* We model FY25-28E revenue CAGR of 12%, driven by 7% ASP growth and 5% volume growth. Improving product mix and recent launches could support stronger ASP growth, while the focus remains on volume growth through linking distributors’ incentives to volume growth rather than value growth.
* We build in ~165bp EBITDA margin expansion over FY25-28E, with gross margin expansion contributing ~100bp, led by premiumization and mix improvements. The recent ~14% price hike should cushion the margins from near-term headwinds from raw material inflation. Accordingly, we model EBITDA/PAT CAGR of 18%/20% over FY25-28E.
* Reiterate BUY rating with an unchanged TP of INR305, based on 45x FY28E EPS.
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