Antique retains 'Buy' on Arvind Fashions, flags growth from brand overhaul

Analysts at Antique Stock Broking remain bullish on Arvind Fashions (AFL) and have retained their Buy rating on the fashion retailer, citing expected improvement in profitability due to a better channel mix, lower discounting, disciplined inventory management, and operating leverage.

 

Abhijeet Kundu, Anuj D, and Jaini Solanki of Antique remain optimistic on AFL, noting that favourable industry trends in casual apparel, a mature and cash-generating brand portfolio, and recent improvements in supply chain and working capital strengthen long-term value creation.

 

At the current market price of ₹431 per share, the analysts see a potential upside of 75.87 per cent. They have set a target price of ₹758 per share, derived from a SoTP-based valuation on FY28 estimates.

Arrow, Flying Machine in focus

Arvind Fashions’ performance in recent years, analysts said, has largely been driven by US Polo Assn (USPA), while growth in Arrow and Flying Machine (FM) has remained muted.

 

“Through our research, we believe Arrow and FM have undergone significant changes to improve their value proposition and bolster growth. Arrow’s growth is likely to be driven by brand repositioning, increased focus on casual wear, and efforts to improve inventory turns,” wrote the analysts in a research note.

 

The brokerage further noted that management’s expertise from the success of USPA’s casual wear segment is likely to support Arrow’s growth. Flying Machine has also revamped its brand logo and store infrastructure to improve customer recall, reduced fast-fashion saliency, and enhanced its value proposition.

 

“These initiatives, coupled with the new MD’s expertise in jeans, are likely to improve FM’s trajectory,” said the brokerage.  CHECK Stock Market LIVE Updates 

Turnaround on the cards

According to the brokerage, AFL continues to focus on scaling its power brands, with progress visible in the turnaround of Arrow and Flying Machine.

 

Arrow (an ₹800 crore brand as per Antique’s estimates), historically a formal-wear label, is making efforts to strengthen its presence in casual wear through the introduction of new categories.

 

For Flying Machine (a ₹500 crore brand as per Antique’s estimates), the brand logo and price architecture have been refreshed, which analysts believe will improve brand appeal.

 

“US Polo Assn. (USPA) is expected to deliver stable growth through category extensions into kidswear, innerwear, footwear, and accessories. Tommy Hilfiger and Calvin Klein remain well positioned to benefit from the ongoing premiumisation trend in India,” said the analysts.

Store expansion to be franchise-led

The brokerage further highlighted that the company’s management has guided for a 15 per cent annual increase in retail space, supported by opportunities arising from the expansion of large urban centres.

 

By the year-end, the total store network is expected to surpass 1,000 stores across 150 cities. USPA alone is anticipated to close the year with over 400 stores, with around 60 new stores added during the year.

 

AFL, Antique said, follows a multi-channel distribution approach, with retail, wholesale, and online contributing 46 per cent, 27 per cent, and 28 per cent of revenue, respectively, as of Q3FY26. Consequently, the contribution from direct channels is expected to increase, with saliency estimated to reach around 75 per cent over the mid to long term from the current 63 per cent, said Antique.

Profitability steady in near term

According to Antique, margin expansion is expected to be supported by a favourable channel mix and higher full-price sell-through.

 

For Arrow, analysts expect store-level margins to improve to high single to low double digits over the next three years, from mid-single digits currently. “The brand has already achieved post-tax profitability and management expects margins to reach mid-single digits in FY27,” said Antique.

 

For Flying Machine, the brokerage anticipates a further reduction in losses in FY26. Management expects the brand to reach EBITDA profitability by the end of FY27.

 

Antique estimates overall Ebitda margin expansion of around 120 basis points over FY25–FY28E.

 

“The company has historically delivered more than 100 bps of operating leverage over the past few years (Ebitda margin at 10.2 per cent/12.0 per cent/13.0 per cent in FY23/FY24/FY25) and aims to sustain annual Ebitda margin expansion of 50–80 bps. AFL further plans to reinvest these gains into higher marketing spend to support future growth,” the brokerage said.

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(Disclaimer: The views and investment tips expressed by the analysts in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.)