Aditya Birla Fashion and Retail - Recovery better than expected - HDFC Securities

Mr. Jay Gandhi, Institutional Research Analyst, HDFC Securities

Recovery beat expectations (at 37.5% of pre-COVID sales vs HSIE's 33%), mainly led by Madura, while Pantaloons continued to lag expectations. Madura and Pantaloons grew 134% and 129% respectively (INR5.55/2.2bn vs HSIE: INR4.1/2.6bn). The GM recoup YoY (49.6%) was sharper than expected (HSIE: 47.7%), led by (1) lower-than-expected inventory provisioning and discounting levels and (2) higher retail sales in Lifestyle brands. The EBITDA loss came in at INR1.6bn (HSIE: INR2.5bn). Net debt has inched up QoQ to INR12bn, courtesy working capital and loss funding. FY23/24 EBITDA estimates remain largely unchanged. We maintain our BUY recommendation on ABFRL with a DCF-based TP of INR 250/sh, implying 15x Jun-FY23 EV/EBITDA.

1QFY22 highlights: Revenue grew 142% YoY to INR 7.7bn (standalone). Lifestyle brands recovered 43% of 1QFY20 sales (HSIE: 33%) anchored by online sales (98% of pre-COVID19 sales) and reasonable recovery in the retail channel (47% of Pre-COVID19 sales) The wholesale channel remains under stress (at 19% of 1QFY20 sales). Pantaloons lagged expectations. The value format grew 129% YoY to INR2.2bn (HSIE: 2.6bn). Other business grew 155% YoY (96% of 1QFY20 sales). The GM recoup YoY (49.6%) was sharper than expected (HSIE: 47.7%), led by (1) lower-than-expected inventory provisioning and discounting levels and (2) higher retail sales in Lifestyle brands. The EBITDA loss came in at INR1.6bn (HSIE: INR2.5bn). The company intends to aggressively start store additions in 2HFY22. Net debt has inched up QoQ to INR12bn (INR6.5bn in 4Q), courtesy WC and loss funding.

Outlook: We are encouraged by ABFRL's topline/margin recovery. Our FY23/24 EBITDA estimates remain largely unchanged. We maintain BUY on ABFRL with a DCF-based TP of INR 250/sh, implying 15x Jun-FY23 EV/EBITDA.

Shares of Aditya Birla Fashion and Retail Limited was last trading in BSE at Rs. 221.9 as compared to the previous close of Rs. 224.45. The total number of shares traded during the day was 167124 in over 1980 trades.

The stock hit an intraday high of Rs. 227.55 and intraday low of 219.85. The net turnover during the day was Rs. 37272617.

Source : Equity Bulls

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