Continues to deliver consistent growth; maintain BUY!
Result Synopsis
Ethos Ltd registered another quarter of consistent growth wherein revenue grew by 23%YoY to Rs3.11Bn, which was backed by healthy volume growth due to new store openings and strong SSSG. ASP also improved owing to price hikes and enhanced contribution of luxury & high luxury watches. For FY25, revenue increased by 25%YoY wherein ASP improved by 7%YoY, implying a strong volume growth of ~16-17%YoY. Share of luxury & high luxury improved to 70% Vs 68% in FY24. Company reported SSSG of 17.4%YoY in FY25 as compared to 16% in FY24. During the year company opened 14-new stores, taking the overall store count to 73nos (~16%YoY growth). Revenue from CPO segment increased by 32%YoY. EBITDA margins during Q4FY25 came in at 15.3%, a 105bps expansion as against Q4FY24. On annual basis, margins remained at 15.2%YoY on account of initial costs associated with new store addition & higher employee cost. Net profit increased by 16%YoY to Rs963Mn for FY25. During the year loss from JVs stood at Rs19Mn Vs profit of Rs70Mn in FY24. Billings for Q4FY25, increased by 23%YoY to Rs3.61Bn wherein online billings constituted 38% & registered a growth of 50%YoY. For FY25, total billings grew by 25%YoY to Rs14.57Bn & online billings (37%), reported a growth of 37%YoY.
Inventory as on March’25 was elevated at Rs5.93Bn (35% higher Vs FY24); largely on account of new store addition & inventory bought-in for new stores wherein the opening was postponed. Consequently, working capital cycle expanded and dented the cash generation.
Management Guidance
Company is planning to expand their store network from 73 to 100 in FY26 (~37%YoY growth). Also, management reiterated their long-term goal of growing their revenue tenfold over the next decade.
Our View
We believe ETHOS will continue to register healthy growth in coming years, which should be driven by better volumes coupled with improvement in ASP led by annual price hikes from brands and increase in contribution from luxury & high luxury segment. Growth will also be driven by robust store additions planned for FY26 (8 new boutiques added in Q1FY26), and we also expect better ramp-up from the stores which were opened in past 1-1.5 years, which should boost the SSSG. Incrementally, with ramp-up of new stores, we expect gradual improvement in operating margins of ~80bps over coming 2-years. Overall, we expect Revenue/EBITDA/PAT growth of 23%/27%/30% over FY25-FY27E. The stock trades at P/E(x) of 41x on FY27E EPS of Rs66.6. Given the expected strong growth momentum, we continue to value the company at P/E(x) of 60x on FY27E EPS and retain our BUY rating on the stock with target price of Rs4,011.