Consolidated Operations And Premium Offerings Will Drive Future Success

Key Takeaways

• Streamlined supply chain, premium product focus, and automation improve efficiency and margins, supporting growth as urbanization and organized retail boost demand.
  
• Enhanced direct-to-consumer strategy and regulatory tailwinds drive brand visibility, market share gains, and increased profitability.
  
• Pricing pressures, execution challenges in premiumization, operational missteps, rising online competition, and inefficient marketing spend threaten Campus Activewear's profitability, growth, and market positioning.

Catalysts

Engages in the manufacture, trading, distribution, and sale of sports and athleisure footwear and accessories for men, women, and kids and children in India and internationally.

• The consolidation of three raw material warehouses into a single, higher-throughput facility removes supply chain bottlenecks and more than doubles capacity, positioning Campus Activewear to efficiently meet rising demand from increased urbanization and middle-class income growth in India-this is set to drive future revenue growth.
  
• Expanding premium product offerings, specifically in sneakers (with 150% growth YoY), and ongoing elevation of ASP (average selling prices) by focusing on "fashion sneaker" trends are likely to enhance top-line growth and contribute to gross margin expansion over the next several quarters.
  
• With the industry-wide shift from unorganized to organized footwear, and the impact of BIS regulations reducing non-compliant and fake imports, Campus is poised to capture additional market share, which will support accelerated revenue growth and increased operating leverage.
  
• Enhanced direct-to-consumer efforts, including online channels, digital marketing campaigns, and large-scale distributor and retailer outreach, serve to boost brand visibility and are expected to improve both sales volumes and net margins by reducing dependency on low-margin, third-party retailers.
  
• Investments in automation, SAP implementation, and expanded in-house manufacturing (such as additional upper production at Paonta Sahib) will improve operational efficiency, lower per-unit costs, and support higher net margins and earnings growth as demand from health, fitness, and lifestyle trends continues to rise.

Campus Activewear Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Campus Activewear's revenue will grow by 13.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 7.6% today to 9.8% in 3 years time.
• Analysts expect earnings to reach ₹2.3 billion (and earnings per share of ₹7.75) by about August 2028, up from ₹1.2 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 62.5x on those 2028 earnings, down from 65.7x today. This future PE is greater than the current PE for the IN Luxury industry at 24.7x.
• Analysts expect the number of shares outstanding to decline by 0.38% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.36%, as per the Simply Wall St company report.

Campus Activewear Future Earnings Per Share Growth

Risks

• Intense price competition from unorganized players and heavy discounting in the lower price segments could continue to compress gross margins, especially if Campus remains overexposed to price-sensitive, mass-market consumers, thereby restricting future net margin expansion and impacting profitability.
  
• Execution risks related to premiumization and entry into higher-priced segments persist, as consumer preference for international brands in the ₹2,000+ range limits Campus's ability to capture aspirational buyers, which could result in slower revenue growth and higher SG&A expenses with uncertain returns.
  
• The company's repeated delays and misses in achieving its guided margin and growth targets, due to operational disruptions (such as warehouse and SAP implementations), suggest a persistent risk of executional missteps, making consistent earnings growth and margin recovery less certain.
  
• Accelerating online channel competition, disruptions, and the lagging recovery in e-commerce performance expose Campus to global and domestic digital-first brands, potentially making revenue growth less resilient if market share is lost in this rapidly expanding channel.
  
• Higher advertisement and promotion (A&P) spends without demonstrable improvement in ROI could weigh on EBITDA margins, and if increased branding efforts do not translate into stronger revenue momentum or market share gains, shareholder returns and earnings may underperform expectations.

Valuation

• The analysts have a consensus price target of ₹311.125 for Campus Activewear based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹344.0, and the most bearish reporting a price target of just ₹276.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹23.4 billion, earnings will come to ₹2.3 billion, and it would be trading on a PE ratio of 62.5x, assuming you use a discount rate of 15.4%.
  
• Given the current share price of ₹260.7, the analyst price target of ₹311.12 is 16.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.