Domestic brokerage firms JM Financial and Nuvama Research have initiated coverage on one of the recently-listed Jhunjhunwala stock and they see a strong upside potential of 75 per cent in the stock. The stock is Baazar Style Retail and the brokerage is swearing upon the potential of ample value unlocking for the company in the long run.
Listed in September 2024, Baazar Style Retail is one of the fastest growing value retail players in East India. It caters to the neo-middle class in Tier II and III cities through its 214 stores across nine states and more than 175 cities, with a strong footprint in North and East India. Its stores are spread over 9,000 sq ft, contributing to a total retail area of more than 18 lakh sq ft.
In the last few years, it has posted a strong same store sale growth (SSSG) on greater throughput driven by sectoral tailwinds which resulted in a higher operating leverage and better return ratios. It plans to improve throughput and open stores aggressively using internal accruals, said Nuvama.
"This steadily growing value retail player turned profitable in FY24. Drivers such as store expansion and a healthy rise in revenue per sq. ft. can lead to a strong growth in revenue and EBITDA. RoE expansion to 20 per cent by FY27E from 11 per cent in FY24 can trigger a valuation rerating," it said.
Ace Dalal Street investor Rekha Rakesh Jhunjhunwala owned 2,723,120 equity shares, or 3.65 per cent stake in the company as of December 31, 2024. Her stake in the company is worth Rs 61.25 crore as of today. The company raised a total of Rs 834.68 crore via IPO, selling its shares of Rs 389 apeice..
Nuvama expects a revenue/Ebitda/PAT CAGR of 29 per cent/35 per cent/87 per cent over FY25–27. The scope for expansion for Baazar Style is large as India has more than 5,000 Tier IV towns. This, along with its healthy store economics, gives it a payback period of less than three years. Iit can achieve healthy growth rates over a longer period, said the brokerage firm.
The stock is a strong candidate for a valuation re-rating on better store economics, aggressive growth plans (adding 40-50 stores/year), and size of the opportunity, Nuvama added. "We initiate coverage with a ‘buy' rating and target price of Rs 388 (12 times FY27E EV/EBITDA). Nuvama's target suggests a 75 per cent upside potential in the stock.
However, the stock has tumbled more than 2 per cent to Rs 220.70 on Thursday, with its market capitalization slipping below Rs 1,700 crore mark. The stock tested its all-time low at 181.30 on February 18, 2025. The stock has crashed 43 per cent from its IPO price, while it is down nearly 50 per cent from its all-time high of Rs 430.95, hit on September 6, 2024, its listing day
JM Financial also initiated coverage on the stock earlier this month. It expects RoE/ROIC to improve from 14 per cent/11 per cent in FY24 to 22%/19% by FY27 led by improving profitability and reducing working capital days. The EPS in FY25 is expected to increase by 32 per cent to Rs 5.4.
We believe, 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 Limited with a 'buy' rating and a target of Rs 400, it said, suggesting 80 per cent upside in the stock. "Consistent execution, improving profitability and working capital days can lead to further re-rating."