Buy Campus Activewear Ltd for the Target Rs 310 by Motilal Oswal Financial Services Ltd
Slightly weaker 1Q; mid-teens growth key to re-rating
* Campus Activewear (Campus)’s revenue grew 12% YoY (on a weak base) and came in below our expectations (17% YoY). Management indicated that reported growth was ~4.5% lower due to one-off factors such as a change in accounting policy by online platforms (from Jul’25) and a shift to the SoR model for FoFo stores.
* Growth continued to be volume-driven (+12% YoY), while reported ASP remained broadly stable YoY. Campus has implemented ~8% blended ASP hike across the portfolio from Apr’26, which, along with premiumization of the mix through rising salience of sneakers and the recently launched ELAN range, should help offset the drag from input price inflation.
* Management is confident of delivering mid-teen revenue growth, with equal contribution from volume growth and ASP increases.
* Gross margin (+35bp YoY; 100bp beat) remained resilient despite RM inflation, although EBITDA margin (-15bp YoY; 155bp miss) was weighed down by minimum wage revisions and higher indirect costs from the newly commissioned plants. Management reiterated its aspiration of improving EBITDA margins to 17-19% over the medium term (vs. 16.5% in FY26).
* We fine-tune our FY27-28 estimates and now model ~13%/16%/20% FY26- 29E CAGR in revenue/reported EBITDA/PAT, with EBITDA margin improving ~155bp to ~18% by FY29.
* Reiterate BUY with a revised TP of INR310, premised on 40x Sep’28E EPS.
Key takeaways from the management commentary
* One-off impacts on revenue: Reported revenue growth was impacted by ~4.5% due to temporary online accounting changes (~2.5%) and the transition to SOR for franchise stores (~2–2.5%), implying stronger underlying growth.
* Price hikes: Campus implemented ~8% price hike from Apr'26. While reported ASP was diluted by the online accounting change and stronger school shoe sales during 1Q, the price hike has been well absorbed with resilient secondary demand, record dealer orders, and no meaningful demand disruption. The company does not intend to roll back prices even if input costs soften, supporting future margin expansion.
* Network Expansion: Campus opened 18 stores (highest in 7–8 quarters) and remains on track to add ~90–100 stores in FY27, expanding across tiers with increasing focus on underpenetrated markets such as Kerala, Tamil Nadu, and the North-East, while Rajasthan, Maharashtra, MP and Chhattisgarh continue to deliver strong traction.
* Guidance: The company reiterated its target for mid-teens revenue growth, with largely equal contribution from volume growth and ASP hikes. Further, it aims to improve EBITDA margins to 17–19% over the medium term
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 fine-tune our estimates and build in volume/ASP/revenue CAGR of 6%/7%/13% over FY26-29. Improving product mix, price hikes, and recent launches could support stronger ASP growth, while the focus remains on volume growth as the company has linked distributors’ incentives to volume growth rather than value growth for FY27.
* We build in ~155bp EBITDA margin expansion over FY26-29E, with gross margin expansion contributing ~65bp, led by premiumization and mix improvements. The recent price hike should cushion the margins from near-term headwinds from raw material inflation. Accordingly, we model EBITDA/PAT CAGR of 16%/20% over FY26-29E.
* Reiterate BUY with a revised TP of INR310 (earlier INR325), based on 40x Sep’28E EPS.
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