CAMPUS - Campus Activewear Limited Share Price

Outlook by Management and Key Points:

1. Revenue Growth & Market Expansion:

   • Achieved record quarterly revenue of Rs.514.8 crores (9.1% YoY growth), driven by distribution expansion, festive online sales, and sneaker category growth (116% YoY).
   • Focus on penetrating Southern markets via online channels and premium large-format stores.
   • Added 6 new EBOs (total 290), with plans for 40"“50 annual store additions.

2. Product & Channel Strategy:

   • Launched 69 new products, emphasizing women's and kids' categories.
   • Sneakers remain a key growth driver (15"“20% higher ASP than average products). New capacity (2.4 million pairs) from Haridwar to boost production.
   • Online sales grew 11% YoY; offline distribution grew 9% with healthy inventory days (80"“90).

3. Margin Outlook:

   • Gross margin dipped to 51.2% (vs. 51.4% YoY) due to raw material inflation and non-BIS inventory liquidation (20"“40 bps impact).
   • EBITDA margin expanded to 16.6% (+440 bps YoY) on better working capital and lower provisions.
   • FY26 margins expected to normalize (guided 17"“19% EBITDA) as non-BIS inventory clears (sub-10% remaining, to be liquidated by March 2025).

4. Cost Management & Pricing:

   • Selective price hikes (7"“10% in premium categories) to counter input costs (e.g., TPU).
   • A&P spends flat YoY (7"“7.5% of revenue). Employee costs stable with no major hiring plans.

5. Operational Efficiency:

   • Debt-free status improved PAT conversion. ROE at 17.5%, ROCE at 22.1%.
   • Inventory days reduced to 95 (from 110 YoY).

6. Demand & Competition:

   • Cautiously optimistic on demand recovery; outperformed peers in key regions (North, Central, West).
   • Competitive intensity stabilizing; no significant threats noted.

7. Government & Industry Tailwinds:

   • Positive on potential government support for labor-intensive footwear sector to boost employment.

Key Focus Areas for FY26: Premiumization (sneakers), women/kids' segments, Southern expansion, and margin normalization.

Question: What were the reasons for the gross margin decline both sequentially and Y-o-Y, and what steps are being taken to mitigate this?
The decline was due to raw material inflation (notably TPU prices from customs duty) and liquidation of non-BIS inventory. Selective price hikes (7"“10% in less-sensitive categories) were implemented to offset costs, with further normalization expected post-March as non-BIS inventory reduces to <10% of stock.

Question: Can you quantify the impact of non-BIS inventory liquidation and adverse product mix on margins?
Non-BIS liquidation impacted margins by 20"“40 bps. Raw material inflation and mix changes contributed to a 50 bps YTD gross margin decline. By Q4 FY25, non-BIS inventory will be largely cleared, minimizing future drag.

Question: How should we model advertising and employee costs going forward?
A&P spends (% of sales) will remain stable at ~7"“7.5% annually. Employee costs are under control, with no significant headcount additions planned; operating leverage from volume growth will reduce their % contribution.

Question: Was Q3 growth driven by primary or secondary sales, and how is channel inventory health?
Growth was driven by secondary sales (replenishment), with healthy distributor inventory levels (~80"“90 days). No push sales occurred, and DSOs remained stable, reflecting disciplined working capital management.

Question: What is the competitive landscape like, and is Campus gaining market share?
Campus regained share in North, Central, and West markets despite subdued demand. Strategic initiatives (distribution expansion, sneaker focus, marketing) drove outperformance. Competitor intensity peaked last year and is now stabilizing.

Question: Why were FY25 guidance metrics (revenue growth, ASP, margins) not met, and are they achievable in FY26?
Guidance (mid-teens revenue, 17"“19% EBITDA) remains aspirational. Progress is evident (Q3 EBITDA at 16.6%), with normalization expected post-FY25 as macro challenges ease. Sneaker premiumization and cost controls will aid margin recovery.

Question: What is the outlook for women/kids categories and Southern market expansion?
Women/kids categories face temporary skew from men's sneaker growth but remain focus areas. Southern penetration is scaling via online channels and open footwear launches, balancing ASP dilution with volume gains.

Question: How will new manufacturing facilities (Gannaur, Haridwar) impact capacity and margins?
Haridwar's sneaker-focused facility (2.4M pairs/year) will drive premiumization and margins. Gannaur's unit is operational, and vertical integration will reduce costs. Both facilities align with long-term growth targets.

Question: What is the demand outlook across tiers (metro, Tier 1"“3), and are there signs of slowdown?
Demand improved Y-o-Y but remains below pre-pandemic levels. Geographically, sales are balanced (North 42%, West 22%, East 21%), with no significant tier-wise divergence. Cautious optimism prevails for FY26.

Question: How has the dividend policy evolved, and what payout ratio is targeted?
An interim dividend (INR 0.70/share) was declared for the first time, reflecting confidence in cash flows. Future payouts depend on board decisions, with no fixed PAT% target.