Arvind Fashions Stock Check: Should you buy the retail stock this festive season? A fundamental & technical analysis

Retail stock Arvind Fashions has been on an impressive run lately, catching the eye of investors with its remarkable performance. Over the past year, the retail stock has surged by more than 81%. In 2024 so far, it has climbed nearly 46%, delivering positive returns in six out of the ten months this year.

In October, the stock has risen 1 per cent so far, extending its gains for the third consecutive month. It climbed over 11 per cent in September and 4 per cent in August. Before that, the stock witnessed volatility as it declined 1 per cent in July after an over 17 per cent rise in June, an 8.5 per cent fall in May and a 6 per cent gain in April. It corrected 1 per cent and 12.3 per cent in March and February, respectively but saw an over 27 per cent rise in January.

The smallcap stock hit a 52-week high of ₹622.95 last month. Currently, it is just 4 per cent away from this peak. Meanwhile, it has now surged almost 100 per cent from its 52-week low of ₹299.15, recorded in October last year.

With such substantial gains, the key question for investors is whether this upward momentum will persist. Here's what the experts say about the stock's technical and fundamental outlook.

Technical View

Gaurav Bissa, VP, InCred Equities

Arvind Fashions has been forming higher highs and higher lows on the weekly charts, a characteristic of the uptrend. It has been respecting the supports in the Williams Alligator index on the weekly charts with multiple instances of bounce seen. Currently, the setup does not suggest fresh buying as indicators like the RSI are approaching resistance. A move near 530-540 levels can provide a lucrative opportunity to add the stock for the long term. A close above 73 levels on the weekly chart can push the RSI towards 80-82 levels, which in turn can give a strong boost to the stock price. Existing investors are advised to hold the stock as the uptrend remains intact.

Rajesh Palviya, SVP - Technical and Derivatives Research, Axis Securities

The stock is in a strong uptrend, forming a series of higher tops and bottoms, indicating a strong upward movement. Recently, the stock regained its 20-day and 50-day SMA and rebounded sharply, confirming buying pressure at the support zone. The stock has decisively exceeded the multi-month resistance level of 544, indicating bullish sentiments. The rising volumes over the past four months signify increased participation in the rally. The daily, weekly, and monthly RSI indicators are in the positive terrain, showing rising and sustained strength across all time frames. The short-term support zone is around 545-540, and we expect this momentum to extend towards 645-685 in the coming months.

Fundamental View

Sunidhi Institutional Research has initiated coverage on Arvind Fashions with a buy call and a target price of ₹945, indicating an upside potential of over 58 per cent in the next 2 years.

"AFL’s established footprint in India’s high-street fashion world has been one of the hallmarks of its successful journey thus far. We believe, with its brands doing extremely well, the company would find similar success in the rest of the branded portfolio with 15% CAGR expansion in the retail space in the next 2-3 years. The stock at CMP of ₹550 is trading at 117x (vs 3-year median PEM of 100x) its FY24 adjusted EPS of ₹ 4.71 at par with retail peers. As the profitable growth journey has started picking momentum since FY23, we recommend investment for a two-year horizon for a PO of ₹945, which would factor 50x FY27E EPS of ₹18.9," the brokerage said.

The brokerage noted that Arvind Fashions Limited, with 30 years of retail experience, is one of India's leading lifestyle companies with a strong portfolio of well-known brands. The company has focused on expanding its physical presence to strengthen its brand portfolio. With India's rising per capita income, the company is well-positioned to benefit from a growing middle class and the casualisation trend, the brokerage said while projecting revenue/EBITDA/PAT CAGR of 13%/21%/50% for FY24-27.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.