120 New Stores And Apparel Launches Will Expand Global Presence

Key Takeaways

• Expansion and diversification through new stores and product lines aim to increase market presence and future earnings.
  
• International market entry and a focus on technology and innovation are positioned as key growth opportunities for revenue and operational efficiency.
  
• Delays in store openings, pilot expansion risks, inventory concerns, weak demand recovery, and competitive pressures may challenge Go Fashion India's revenue and growth stability.

Catalysts

Engages in the design, development, sourcing, marketing, and retailing of women’s and girl’s bottom-wear products under the Go Colors brand in India.

• Go Fashion is expanding its store network, adding more than 120 net new stores annually starting FY '26. This expansion aims to drive higher revenue by increasing market presence and accessibility.
  
• The company's initiative to introduce new women's top wear and select men's apparel categories will diversify its product offering. This expansion into new categories is expected to capture a larger wallet share, potentially boosting future earnings.
  
• An international expansion plan, starting with an inaugural store in the Middle East in partnership with Apparel Group, represents a significant opportunity for revenue growth by tapping into new markets.
  
• The company is focusing on technology and product innovation to stay ahead of industry trends, which could enhance operational efficiency and potentially improve net margins.
  
• Go Fashion plans to optimize its working capital further by reducing inventory days, which is expected to strengthen its balance sheet and support sustainable long-term growth through improved cash flows.

Go Fashion (India) Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Go Fashion (India)'s revenue will grow by 16.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.5% today to 13.7% in 3 years time.
• Analysts expect earnings to reach ₹1.8 billion (and earnings per share of ₹32.84) by about May 2028, up from ₹866.6 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹1.2 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 49.8x on those 2028 earnings, up from 49.0x today. This future PE is greater than the current PE for the IN Specialty Retail industry at 33.4x.
• Analysts expect the number of shares outstanding to grow by 0.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.95%, as per the Simply Wall St company report.

Go Fashion (India) Future Earnings Per Share Growth

Risks

• Delays in planned store openings and slow April sales may indicate challenges in execution and demand, potentially affecting revenue and growth targets.
  
• The pilot expansion into menswear and new women's categories carries risks of brand dilution and execution complexity, which could impact operational costs and margins if not successful.
  
• Inventory management remains a concern, particularly with potential risks of increased inventory from new category rollouts, which could affect the balance sheet and working capital efficiency.
  
• The low single-digit same-store sales growth (SSSG) suggests weak demand recovery, which may impact future revenue growth if this trend persists.
  
• Competitive pressures from existing brands and new entrants in the women's bottom wear market could affect market share and revenue stability.

Valuation

• The analysts have a consensus price target of ₹1076.875 for Go Fashion (India) 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 ₹1317.0, and the most bearish reporting a price target of just ₹770.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹13.0 billion, earnings will come to ₹1.8 billion, and it would be trading on a PE ratio of 49.8x, assuming you use a discount rate of 14.9%.
  
• Given the current share price of ₹785.9, the analyst price target of ₹1076.88 is 27.0% 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.