Buy Go Fashion India; target of Rs 300: Motilal Oswal

What happened

Motilal Oswal reiterated its Buy rating on Go Fashion India and set a target price of Rs 300. The broker reported that second-quarter revenue fell 3% year over year, while pre-Ind AS EBITDA, a measure of operating earnings, dropped 40% to INR200m as fabric inflation and higher brand spending squeezed profits.

Confirmed

Global impact / market context

Lower operating earnings and a decline in the quarterly profit per sale show that higher fabric costs and brand spending are outweighing sales performance. If those pressures persist, Go Fashion may generate less cash from operations to support its larger-store transition, despite its reported cash balance.

Analyst inference

Motilal Oswal says the share price already reflects near-term margin pressure, citing a valuation of about 13 times trailing operating earnings before accounting changes. Its Rs 300 target uses 10 times estimated FY28 earnings, so the investment case depends on future profitability supporting that valuation.

Confirmed

What to watch

1. Watch whether delayed large-format-store dispatches reach customers in October, since the report says the festive shift pushed dispatches into that month and timing can shift revenue between reporting periods. Confirmed
2. Track fabric costs and brand spending against sales: continued pressure could further reduce operating earnings and profit per sale, while easing costs could help profitability recover. Analyst inference
3. Observe whether Go Fashion uses its INR2.5b cash balance to fund larger stores without taking on borrowed money; the report describes the company as debt-free. Confirmed

Evidence

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