Buy Aditya Birla Nuvo - Latin Manharlal Securities

Incorporated in 1956, Aditya Birla Nuvo Ltd (ABNL) (erstwhile Indian Rayon and Industries Ltd) is a diversified conglomerate within Aditya Birla Group. It is a foremost player in most of its business segments, including Viscose Filament Yarn (VFY), Carbon Black, Branded garments, Fertilizers, Textiles and Insulators. ABNL operates in 31 countries across 6 continents with 60%+ revenue share from overseas operations.

Presence across High-growth sectors: Well placed to yield diversification benefits

ABNL's presence across high growth sectors of India makes it well positioned to reap benefits of

- High Savings rate - Financial Services
- Increasing Domestic Consumption - Telecom & Retail
- High Infrastructure Investments - Agriculture
- Rising Outsourcing Trend - IT & ITeS

Aditya Birla Financial Services (ABFS) gained market share in the Life Insurance, Asset management, and NBFC and Broking business during FY12. Its Life Insurance business has improved its market share from 6th in FY11 to 5th in FY12. The Asset management business has also improved its ranking from 5th in FY11 to 4th in FY12. BSLI turned profitable in FY12 and declared its maiden dividend. Aditya Birla Finance company has improved book size by 84% to Rs.3,425 Crs at end of FY12. The Management expects to report similar growth in FY13E.

Eyes new records in Financial Services business: on a strong footing

The Financial services business has become the largest contributor to the ABNL's profits in FY12. Backed by its strong customer base (~5.5 mn customers), nation-wide distribution footprint (1,775 points of presence and about 200,000 agents / channel partners) and brand salience, ABFS is all set to create a new record.

Fashion & Lifestyle business: aims to fortify this leadership position

In FY12, Madura Fashion & Lifestyle (MFL), the lifestyle garments business of ABNL crossed Rs 2200 Crs and almost doubled in past 2 years growing at CAGR of 34%. The company has 1129 Exclusive Brand Outlets (EBOs) spanning across ~1.6 mn sq. ft. Each of MFL' flagship brands is leader in respective category and it aims to fortify this leadership position by entering value segment (incl. kids-wear & womens-wear).

Controlling stake acquisition in Pantaloon Retail to augur well for MFL

The proposed Pantaloon Retail deal will help ABNL to expand through new products and a doubling of retail space under its control. We believe the deal is in-line with ABNL's strategic objective of extending foot prints into the fast growing value fashion segment, widening its operating market size through multiple brands, multiple store formats and a complete range across categories for Men, Women and Kids.

Gaining Market share in Telecom: biggest revenue share gainer in last 2 years

ABNL's holds 25.3% in Idea Cellular - the 3rd largest cellular operator in India - with revenue market share at 14.4% and it has been the highest gainer of revenue market share since past 2 years. Idea has the highest 93% active subscribers' ratio in industry and is a leading net subscribers' gainer post launch of mobile number portability in India..

At the CMP of Rs.807, the stock is trading at 7.7x its FY14E EPS of Rs.104.26. We recommend BUY on the stock with a 12-18 months target price of Rs.1043, providing an upside of 29.2% from the current levels.

Source : Equity Bulls

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