Campus Activewear Limited — Investor Meet, 15-11-2024: Analysts/Institutional Investor Meet/Con. Call Updates

1. Financial Performance: Campus Activewear demonstrated strong growth in Q2 FY’25, achieving an operational revenue of INR 333 Cr, an impressive 28.8% YoY increase. Volume growth was even more remarkable at 36.2%, with approximately 5.4 million pairs sold. However, gross margins dipped slightly to 52.8% from 53.3% in Q1 FY’25 due to higher promotional activities and trade spends. EBITDA margins also contracted to 12.3% from 15.8% in the previous quarter, largely impacted by increased advertising, promotions, and online commissions. Profit after tax (PAT) was recorded at INR 14.3 Cr, reflecting a PAT margin of 4.2%.

2. Future Outlook and Growth Drivers: Management expressed confidence in maintaining momentum, with expansion plans in large-format stores and new product launches. The partnership with renowned actors as brand ambassadors and targeted marketing campaigns are expected to strengthen brand visibility among the youth.

3. Order Book and Operational Updates: The company has onboarded additional stores, bringing its total exclusive outlet count to 288. A substantial capacity expansion plan, estimated at INR 35 Cr, has been approved to enhance production capabilities in Gannaur and Haridwar, responding to anticipated growth.

4. Analyst Q&A Insights (Detailed):

- Revenue and Profitability: Analysts inquired about abnormal margin pressures due to promotions, with management addressing that a minor gross margin dilution of 50 basis points occurred primarily due to promotional costs.

- Market Position and Competitive Landscape: Management reassured analysts about a strong competitive position, aided by strategic product placements and demographic targeting.

- Operational Challenges or Risks: Questions regarding supply chain dynamics were met with confidence about effectively managing such risks despite macro challenges.

- Capex and Capital Allocation: The focus remains on increasing production capacity while judiciously managing marketing expenditures, with expectations for healthier margins in the second half of FY’25.

- Strategic Priorities and Long-Term Vision: The commitment to product innovation and market expansion positions the company favorably in a recovering demand environment.

5. Market or Regulatory Updates: There were no significant regulatory updates discussed that would directly impact the company’s strategies.

6. Strategic Focus Areas: Key themes identified include emphasis on brand building through strategic endorsements, increasing distribution channels, and refining product offerings to cater to changing consumer preferences.

7. Investor Insight: Overall, Campus Activewear's solid revenue growth and strategic initiatives suggest a positive outlook. With anticipated improvements in margins and a robust brand strategy, it may be viewed favorably, aligning with a ‘buy’ position considering the company’s ongoing adaptations and market responsiveness.