Q2FY24 Review: Vedant Fashions: Confident of a strong H2FY24 performance

2 Nov 2023 , 02:10 PM

Vedant Fashions (Manyavar) reported Q2FY24 results below analysts of IIFL Capital Services estimates on weak expectations with net sales/Ebitda declining by 12%/20% YoY. The performance has been primarily impacted by a weak wedding season and a high base – phenomenon which are likely to reverse in H2FY24. Further, the company is on track to incubate new growth drivers in Twamev and Mohey. Analysts of IIFL Capital Services downgrade their EPS estimates by 3-5% for FY24- 26 and maintain BUY rating on the stock with a TP of Rs1,430. 

Miss on weak expectations: 

Manyavar reported a weak performance, registering a double digit decline in same store sales for a second consecutive quarter, impacted by lower number of wedding dates and a high base. Secondary sales declined by 8% YoY, but on a 4 year Cagr basis (vs. a more comparable Q2FY20 period), secondary sales grew at a Cagr of 12%. Manyavar added 7 EBOs in Q2 (which includes one Twamev EBO) taking the total store count to 669 (including four Twamev EBOs). Retail area at 1.59mn sq ft grew 19% YoY. 

Confident of a strong H2FY24: 

Lower number of wedding dates, a high base and a late festive season this year, have all contributed to a significantly weak performance in H1FY24. However, the trends in the first fifteen days of Navratri across key parameters such as footfalls, average bill value, basket size, among others, have been positive. With reasonable number of wedding dates in H2, coupled with deferred demand from H1, management is confident of delivering a strong performance in H2FY24. 

Downgrade EPS estimates by 3-5%: 

Analysts of IIFL Capital Services factor in the Q2 miss, which is resulting in ~1% downgrade in their sales/Ebitda estimates for FY24- 26. Their EPS estimates are downgraded by 3%/5%/4% for FY24/25/26, driven by higher depreciation costs (primarily under IND AS accounting). While the company is going through a rough patch, primarily on account of a weak wedding season, it is ticking the right boxes in terms of store additions, and incubating new formats (Twamev and Mohey). Analysts of IIFL Capital Services maintain BUY rating on the stock with a target price of Rs1,430.