Campus Activewear IPO: Subscribe Says Motilal Oswal

Campus Activewear is a lifestyle-oriented sports and athleisure Footwear Company that offers a diverse product portfolio across styles, colour palettes, price points and an attractive product value proposition

Largest sports and athleisure (S&A) footwear brand in India

Campus Activewear (Campus) is the largest S&A footwear brand in India, both in terms of value/volume in FY21 with market share of 17%. It has one of the widest product portfolio, targeting diverse customer segments through pan-India presence (covers >85% of addressable market) and robust omni-channel platform.

Sustained focus on premiumization

Campus has increased its focus on metro and Tier 1 cities with 22% of revenue in H1FY22 (vs. 17% in FY19). Further contribution of D2C channel (direct to consumer) has risen sharply to 39% (vs. 6% in FY19). These strategies have helped the company to gradually increase premium products share to 37% (H1FY22) from 31% in FY19 and has resulted in 7.6% CAGR increase in aggregate ASP (average selling price) over FY19-H1FY22.

Further diversification to capture growing market

India's S&A footwear market is expected to grow at 25% CAGR over FY21-25E, with share of branded products expected to rise to 60% vs 56% as of FY21. Campus plans to capture this growth with enhanced focus on women/kids segment (currently ~15% of FY21 revenue); deepening presence in Western/Southern markets (24.5% revenue share); sustained focus on premiumization and extension into casual wear.

Robust financials

Campus business which got impacted by Covid-19 in FY21 has recovered in 9MFY22 with revenue/EBITDA/PAT surpassing FY20 levels. EBITDA margins expanded to 19.4% in 9MFY22 and is further expected to improve with rising D2C share and premiumization. Robust growth in 9MFY22 would result in RoE/RoCE expansion to 30%/22% in FY22 annualized basis. Working capital days improved to 67 days in FY21 from 123 days in FY19 resulting in improved cash flows.

Issue Size:

INR14bn IPO consists of entirely OFS (by promoters and investors), which would result in promoter stake reducing to 74.1% from 78.2% pre-IPO. The market cap post listing would stand at INR89bn.

Valuation & View

Campus with leading market share in India's branded S&A footwear, is well placed to capture the highly underpenetrated and fast growing footwear segment in India. On 9MFY22 annualised EV/Sales basis Campus is valued at 8.1x and seems reasonable compared to ~10x for both Bata and Relaxo. Given Campus' presence in niche S&A segment with pan-India omni-channel presence, along with strong financials, we suggest investors to Subscribe to the IPO.

(Courtesy: Motilal Oswal financial Services)