Target: ₹725
CMP: ₹513.35
Arvind Fashions Ltd stands at an inflection point, transitioning from consolidation into profitable scale-up with a sharper focus on five power brands. This phase of growth will be driven by scaling up core brands, expanding adjacencies profitably, and driving operating leverage. USPA is evolving into a full lifestyle brand, with a third of its revenue coming from non-apparel, while Tommy and CK are strengthening their premium positioning with mid-teen EBITDA margins.
Arrow and Flying Machine are entering a scale-up phase through sharper brand positioning and modern retail formats. Collectively, these initiatives are expected to drive about 13 per cent revenue CAGR and about 190 bps margin expansion over FY26-28E, taking pre-Ind AS EBITDA margin to 10.3 per cent by FY28.
With improving earnings visibility, steady margin expansion and rising return ratios, AFL is well positioned as a high-quality compounding story in India’s branded fashion space. Its balanced portfolio, scalable model, and strengthening financial metrics offer a compelling risk-reward profile.
We value AFL on an SOTP basis, with Lifestyle at 11x EV/EBITDA and PVH at 20x contributing the majority of value, reflecting improving margins and superior profitability, while standalone (Arrow) at 8x and Flying Machine at 5x are assigned conservative multiples amid ongoing restructuring.
We initiate coverage on AFL with a Buy rating and an SoTP-based Dec’27 TP of ₹725.