Emkay Global Financial has given Buy recommendation for Aditya Birla Fashion and Retail with a target price of Rs. 340 in its research report issued on Nov 25, 2021
Emkay Global Financial’s report on Aditya Birla Fashion and Retail
Our checks have revealed encouraging festive trends across channels. Online fashion GMV has almost doubled and physical retail channels are nearing full recovery for most players. Recent 10% correction in ABFRL provides an opportunity to add, in our view. ABFRL stood out in terms of per-store recovery for EBOs at ~110% in Q2 vs. peers at 70-80%. A faster recovery in the relatively more impacted Pantaloons segment and the strong pick-up in the wholesale channel (MBO+LFS) on festive stocking, can surprise ahead. Pick-up in store additions from H2 and new categories, mainly Ethnic, offer strong growth visibility. ABFRL’s entry into ethnic-wear, accounting for ~30% of the industry, boosts the total addressable market significantly. Its faster scale-up can offer potential upsides.
We estimate Revenue/EBITDA CAGRs of 11%/25% over FY20-24E, led by faster recovery trends, aggressive portfolio/store expansion and improving efficiencies. Valuations at ~25x Dec’23E pre-IndAS EBITDA are at a discount to peers. Reiterate Buy with a Dec’22E TP of Rs340, based on 30x Dec’23E pre-IndAS EBITDA.