Vedant Fashions hits 18-month low, slips 7% on weak outlook

According to the management, the overall performance in 9MFY24 got impacted due to significantly lower weddings nationally, general slowdown impacting consumer sentiments

Shares of Vedant Fashions, which runs clothing brand Manyavar, hit an 18-month low of Rs 1,030 as it slipped 7 per cent on the BSE in Tuesday's intraday trade on weak business outlook and soft management commentary.

The stock is trading at its lowest level since July 2022. Moreover, it has corrected 31 per cent from its 52-week high level of Rs 1,487.90, touched on December 8, 2023. It had hit a record high of Rs 1,501.55 on October 6, 2022. 

Vedant Fashions, which made its stock market debut on February 16, 2022, issuing shares at Rs 866 a piece, is primarily engaged in manufacturing and trading of readymade garments being men's ethnic wear such as sherwanis indo-western kurtas suits etc. and women's ethnic wear such as lehanga saree suit kurti etc, and related accessories. The company markets its products under the brand name of 'Manyavar', 'Mohey', 'Mebaz', 'Twamev', and 'Manthan'. The Manyavar brand is a category leader in the branded Indian wedding and celebration wear market with a pan-India presence.

In October to December quarter (Q3FY24), the company's revenue from operations grew by 7.5 per cent at Rs 474.5 crore as compared to Q3FY23. Its profit after tax grew by 4.9 per cent at Rs 157.7 crore over the previous year quarter. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins stayed flat at 51.1 per cent.

During the nine-month period ending Dec 2023 (9MFY24), the company's revenue declined 0.9 per cent at Rs 1,004 crore, while PAT was down 6.8 per cent at Rs 298.40 crore. Ebitda margin contracted to 48.4 per cent from 50.0 per cent in 9MFY23.

The company said its overall performance in 9MFY24 got impacted due to significantly lower weddings nationally, general slowdown impacting consumer sentiments, coupled with higher base effect of last year post Covid. However, the company has been able to effectively maintain strong financial margins and profitability metrices, reflecting resilient business fundamentals; it added.

Vedant Fashions' PAT/Ebitda growth remained soft as subdued revenue growth persisted despite the festive period. Revenue growth was mainly supported by footprint addition; same store sales declined 2.1 per cent YoY in Q3FY24.

"Manyavar has successfully achieved scale within the growing Men’s celebration and occasion wear market. This accomplishment is challenging to replicate. While the company has a healthy growth runway through the expansion of Manyavar’s footprint and the introduction of Mohey (women’s celebration wear) and Twamev (premium celebration wear) in the upcoming quarters, weak consumption remains a concern," according to Motilal Oswal Financial Services.

The stock, owing to a weaker revenue trajectory over the past couple of quarters, has corrected nearly 25 per cent, and is now trading at 51x P/E and 33.5x EV/EBITDA on FY25 basis, which the brokerage firm believes, is fairly priced, given the observed slowdown in consumption. Recovery within the demand and scaling up of emerging brands would remain a key catalyst for the stock to move going ahead, MOFSL said.