TCNS Clothing Co. Ltd. is the leading Indian women’s branded ethnic apparel company with brands like W, Aurelia and Wishful under its portfolio. It has the widest distribution network (in woman apparel) with 465 exclusive brand outlets, 1,469 large format store outlets and 1,522 multi-brand outlets.
Outlook & Valuation: The company has posted excellent CAGR of 49%/83% in revenue/ PAT over FY2014-18 (although on a low base), driven by increase in its product offerings and retail stores. Gross margin have been excellent at 55-60% over the same period. However, its employees cost has been high over FY2016-17 owing to the ESOPs expense which dented earnings in those years. At the upper end of the price band, the PE multiple works out be 44x FY2018 earnings (an exceptionally profitable year), which appears on the higher side when compared to large established listed retail players like Arvind (available at 34x FY2018 PE). Hence, for its limited financial history, singular focus on women ethnic apparel and demanding valuations, we recommend ‘Neutral’ on the issue.
