JM Financial recommends Baazar Style Retail buy at Rs 400

JM Financial has recommended buying shares of Baazar Style Retail with a target price of Rs 400. This represents a significant increase from the current market price of Rs 243.05. The brokerage expects strong growth for the company in terms of revenue, profitability, and return on equity over the next few years. They believe this growth will be supported by expanding the number of stores and improving financial metrics. Over the next few years, JM Financial predicts that Baazar Style Retail will experience annual growth rates of 30% in revenue, 36% in earnings before interest, taxes, depreciation, and amortization (EBITDA), and a 50% increase in profit after tax (PAT). They also anticipate an improvement in return on equity from 14% to 22% by FY27. The company plans to add approximately 55 new stores in FY25, compared to 15-30 in previous years. However, due to higher depreciation costs and lease liabilities, the earnings per share for FY25 may rise by 32% to Rs 5.4, despite showing a decline in post-Ind AS calculations. Baazar Style Retail’s stock is considered undervalued, with its current trading multiples indicating a discount compared to industry averages. With a strong execution plan, the stock has the potential for re-rating. As of December 31, 2024, promoters owned 45.56% of Baazar Style Retail, while foreign and domestic institutional investors held 5.97% and 10.37%, respectively.