TCNS Clothing surges 14%, hits fresh 52-week high on heavy volumes

Shares of TCNS Clothing hit a fresh 52-week high of Rs 564.60 after it surged 14 per cent on the BSE in the intra-day trade on Thursday as analysts believe that a greater focus on offline space, coupled with strengthening of online sales, will fuel growth of the company going forward. The stock of the textile company surpassed its previous high of Rs 554.60, hit on December 17, 2020.

At 11:16 am, it was trading 12 per cent higher at Rs 552, as against a 0.43 per cent rise in the S&P BSE Sensex. Trading volumes on the stock jumped over four-fold with nearly 170,000 equity shares changing hands on the NSE and BSE till the time of writing of this report.

TCNS Clothing designs, manufactures, markets, and retails a wide portfolio of women's branded apparel across multiple brands. The company's product portfolio includes top-wear, bottom-wear, drapes, combination-sets, and accessories that cater to a wide variety of wardrobe requirements of the Indian woman including every-day wear, casual wear, work wear, and occasion wear.

Financially, TCNS Clothing reported strong quarter on quarter (QoQ) growth in the December quarter with revenue recovery rate reaching 72 per cent in Q3FY21 compared with 45 per cent in September quarter (Q2FY21) driven by festive season demand.

The company has embarked on accelerated store expansion plans and is targeting 60-70 exclusive business outlet (EBO) stores in FY22E. Capex/sq ft is expected to be in the range of Rs 2,500-3,000 with an average store size of 800-1,000 sq ft. TCNS is also focusing on enhancing its large format stores (LFS) touchpoints through addition of 200-250 touchpoints.

That apart, TCNS has redeployed Spring Summer (SS) SS20 merchandise to SS21 resulting in inventory reduction and working capital release. Subsequently, cash reserves increased from Rs 110 crore in Q2FY21 to Rs 155 crore in Q3FY21. It has also secured significant fixed cost reduction for the year through rationalizing unviable stores, rental waivers (secured full year saving of around 35 per cent), rationalising staff overheads (annual salary savings at around 20 per cent) and curbing discretionary spending (ad-spends).

Given this, analysts at ICICI Securities expect certain cost saving initiatives to have long-term positive impact post pandemic also. "Accelerated store addition plans, coupled with diversification into newer categories (footwear and Aurelia Girls) are expected to fuel growth, going forward. Being a net cash positive company, TCNS would be better positioned to tide over the current turbulent market scenario," the brokerage firm said in Q3FY21 results update.