Buy Aditya Birla Fashion and Retail; target of Rs 240: ICICI Direct

November 16
03:24 2019

ICICI Direct’s research report on Aditya Birla Fashion and Retail

The consumption slowdown had a negative impact across product categories. However, the apparel segment appeared to be more resilient in discretionary spending. ABFRL reported a healthy show with topline growth of 14.4% YoY to Rs 2297.2 crore. Growth was witnessed across categories, with lifestyle brands and Pantaloons reporting sturdy SSSG of 7.0% and 10.4%, respectively. Despite a significant increase in marketing spends and discounting, EBITDA margins remained constant YoY at 7.1% with EBITDA increasing 15% YoY to Rs 164.2 crore. Driven by a steady operational performance, PBT grew 39% YoY to Rs 59.4 crore. Owing to deferred tax adjustment, PAT for the quarter declined 29% YoY to Rs 30.5 crore.


We continue to like ABFRL due to its strong brand portfolio of lifestyle brands and improving profitability metrics for Pantaloons. Factoring in the performance of YTD FY20E, we revise our profitability estimates downwards. We pencil in revenue and EBITDA CAGR of 13% and 21%, respectively, for FY19-21E. We reiterate our BUY recommendation on the stock with a target price of Rs 240 (2.0x FY21E EV/sales).

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