Baazar Style Retail surges 21% in March; JM Financial projects over 71% upside with ₹400 target | Stock Market News

Baazar Style Retail, a Jhunjhunwala-backed retail stock, has surged nearly 21 percent in March, reversing its three-month losing streak, JM Financial reported. The stock had witnessed sharp corrections earlier, falling 22 percent in February, 13.5 percent in January, and 10.5 percent in December. However, the recent rally has brought the stock back into focus.

JM Financial Initiates Coverage

Recently, JM Financial initiated coverage on Baazar Style Retail with a ‘buy’ rating and set a target price of ₹400, indicating a potential upside of over 71 percent from its current levels. The brokerage expects the company to deliver revenue, EBITDA, and PAT CAGR of 30 percent, 36 percent, and 50 percent over FY24-27E, respectively.

According to JM Financial, Style Baazar’s RoE and RoIC are projected to improve to 22 percent and 19 percent by FY27, driven by enhanced profitability and reduced working capital days. The brokerage also highlighted that EPS growth in FY25 is likely to benefit from higher ROU depreciation and lease liability interest on account of the company’s aggressive store expansion plans. Moreover, the buyout of three leased stores in FY24 will lead to lease reversals, further boosting profitability.

“We believe, this is also one of the key reason for Style Baazar’s low valuations as reported numbers optically look weak but are strong on Pre Ind AS basis. We initiate coverage on Style Baazar with a BUY rating and a target price of ₹400. Consistent execution, improving profitability and working capital days can lead to further re-rating of the stock,” JM Financial said.

Jhunjhunwala’s Stake in Style Baazar and Va Tech Wabag

As of Q3FY25, Rakesh Jhunjhunwala held 27,23,120 equity shares of Style Baazar, representing a 3.65 percent stake valued at approximately ₹66 crore.

Investment Rationale

Style Baazar’s Market Presence and Business Model: According to JM Financial, Baazar Style is a leading value fashion retailer with a strong presence in Eastern India, offering a one-stop-shop experience for families with affordable product ranges. Established in June 2013, the company has rapidly expanded to 199 stores covering 1.8 million sq ft across 170 cities as of December 2024. Over 75 percent of its stores are located in Tier 2, Tier 3, and Tier 4 towns, catering to value-conscious consumers. The company’s product portfolio consists primarily of apparel (85 percent), while general merchandise makes up the remainder.

Strong Growth Potential in the Value Apparel Market: JM Financial highlighted that Baazar Style is well-positioned to benefit from the expansion of India’s value apparel market, which was worth ₹3.7 trillion in FY24. The organised segment, valued at ₹1.3 trillion, is expected to grow at a 17 percent CAGR over FY24-27, reaching ₹2.1 trillion by FY27. The Eastern market, where Style Baazar has a strong presence, is projected to grow at a faster 15 percent CAGR compared to 12-13 percent for other regions.

Robust Execution and Expansion Plans to Drive Growth: JM Financial believes Baazar Style’s strong execution capabilities give it a competitive edge. The company’s repeat sales rate of over 68 percent reflects customer loyalty, while its ability to customize product assortment based on consumer preferences enhances its appeal.

The retailer is also investing in system and process automation to support its store expansion plans, improve unit-level economics, and reduce operational costs. With robust unit economics and lower market penetration, Baazar Style has significant expansion potential. JM Financial estimates that the company could add at least 265 new stores in the coming years, backed by increasing per capita income and urban development. It expects 145 store additions over FY25-27E.

Key Risks to Watch

While bullish on the stock, JM Financial cautioned about certain risks. These include high revenue concentration (80-90 percent) from core markets, heavy dependence on apparel sales, and the intensifying competition in the value fashion retail space. Additionally, the brokerage flagged the risk of unsuccessful private label launches, which could impact margins, and reliance on a limited supplier base without definitive agreements, posing potential procurement challenges.

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.