Motilal Oswal Initiates Coverage of Arvind Fashions with a Price Target of Rs 650

Motilal Oswal Sees Arvind Fashions as Attractive Buy Opportunity

Arvind Fashions (AFL) has demonstrated a steady operating momentum, with its 9MFY26 performance showcasing a robust 8% same-store sales growth (SSSG). This growth is a testament to the strength of AFL's execution across retail, online, and brand portfolios, despite broader demand conditions remaining soft. The company's growth continues to be fueled by direct channels, with retail increasing 14% YoY and online rising 19% YoY, contributing to a more diversified channel mix.

This shift towards direct channels, alongside a reduction in discounting and stable inventory turns (~4x), has aided gross margin expansion (up 115bp YoY) and improved cash conversion. AFL's core brands remain resilient, while adjacencies – now accounting for over 20% of revenue – are scaling profitably, providing additional growth levers. Despite this, the stock is down ~20% on a 6M basis, with valuations now attractive at 35x FY27E earnings (vs. 37x for ABLBL).

Key Drivers of Growth

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We believe this correction presents a compelling entry opportunity into a high-quality franchise featuring a strengthening direct channel, a visible adjacency growth runway, and improving earnings quality. Our outlook for AFL is positive, with a modelled revenue/EBITDA CAGR of 12%/19% over FY26-28E. We reiterate our BUY rating with an SoTP-based Target Price of INR650.