Campus Activewear - Healing And Awaiting A Favorable Macro Environment: HDFC Securities

HDFC Securities Institutional Equities

We recently interacted with Campus Activewear Ltd.’s management. Our key takeaways from the interaction:

1. assortment continues to get more relevant and focused (now offers ~300 designs versus 500 two years back; top 60-70 designs contribute 50-60% of volumes);

2. bigger bets are being taken on faster-moving sub-categories like sneakers and there is greater focus on open footwear to earn volumes (15% of sales);

3. the issue of channel conflicts is behind (all channels now enjoy fair margins).

While internal operations have been streamlined (multiple territories consolidated, distribution team strengthened, product portfolio beefed up and new sales channels added); the company is now waiting for the macro to line up from a demand point of view.

Management highlighted that the sports and athleisure industry growth has moderated to 8-10% versus 14-15% two years back and it is confident the margin will revert to the FY23 level if industry growth returns to FY22/23 levels. The stock is trading at 121 times FY24 price/earning/58 times Sep-26 P/E (on consensus estimates).

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