Q3FY21 Result Update - Aditya Birla Fashion and Retail - ICICI Direct

ABFRL reported a strong QoQ recovery aided by festive demand and wedding season. Overall revenue recovery reached 80% in Q3FY21 vs. 45% in Q2FY21. Revenue for Q3FY21 was at Rs. 2059 crore (down 20% YoY). Gross margins for the quarter stayed constant YoY at 52.3% on the back of tighter markdown management and better product offerings. Sharp rationalisation of fixed costs (Rs. 157 crore cost savings in Q3FY21) led to profitability nearly reaching pre-Covid levels. EBITDA (post Ind-AS 116) was at Rs. 368.5 crore (down 10% YoY) vs. EBITDA loss of Rs. 1.7 crore in Q2FY21. Due to debt reduction, finance cost for Q3FY21 fell 28% QoQ to Rs. 109.5 crore. Hence, PBT was at Rs. 88.8 crore (down 9% YoY) vs. PBT loss of Rs. 242 crore in Q2FY21. Inventory reduction (~Rs. 325 crore in Q3FY21) translated to ABFRL posting healthy operating cashflow worth Rs. 588 crore. In Q3FY21, it raised a second tranche of rights issue of ~Rs. 250 crore (Rs. 750 crore raised of Rs. 1000 crore right issue) & also completed fund raise from Flipkart of Rs. 1500 crore.

Valuation & Outlook

The company rationalised fixed costs leading to savings worth Rs. 1029 crore in YTDFY21. Through capital infusion (Rs. 1750 crore) and better working capital management, ABFRL has pared its debt from Rs. 3181 crore in Q2FY21 to Rs. 580 crore. The management is aiming to reduce debt to Rs. 250 crore by Q4FY21E (excluding capital outlay for acquisition of 51% in Sabyasachi brand: Rs. 398 crore). Factoring the latest acquisition, we expect ABFRL to exit FY21E with debt levels of Rs. 860 crore. Controlled working capital cycle, recovery in profitability and steady FCF generation would result in debt/EBITDA ratio declining to 0.6x by FY23E (6.0x in FY20). We reiterate our BUY rating with unchanged target price of Rs. 210 (2.0x EV/sales FY23E).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ABFRL_Q3FY21.pdf

Shares of Aditya Birla Fashion and Retail Ltd was last trading in BSE at Rs.166.35 as compared to the previous close of Rs. 167.75. The total number of shares traded during the day was 87516 in over 924 trades.

The stock hit an intraday high of Rs. 169 and intraday low of 164.55. The net turnover during the day was Rs. 14568109.

Source : Equity Bulls

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