ICICI Direct has given Buy recommendation for Aditya Birla Fashion and Retail with a target price of Rs. 225 in its research report issued on May 31, 2021

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

ABFRL witnessed a healthy recovery in the most of Q4FY21 on the back of pent-up demand. However a resurgence of the second wave of Covid-19 in the later part of March 2021 negatively impacted customer footfalls and decelerated the pace of growth. Revenue for Q4Y21 (standalone) de-grew marginally by 1.9% YoY to Rs 1783.6 crore. Adjusting for the base effect, recovery rate was at ~85% in Q4FY21. Better product mix and tighter markdown management led gross margins to improve ~200 bps YoY to 53.3%. Sustained rationalisation of fixed overheads (employee and rental expenses down 20% and 18% YoY, respectively) resulted in ABFRL reporting EBITDA (post Ind-AS 116) of Rs 257 crore (up 65% YoY). At the PBT level, the company narrowed down its losses from Rs 178 crore in Q4FY20 to Rs 89.4 crore (I-direct estimate: loss of Rs 75 crore). ABFRL, during the year, received equity infusion worth Rs 2250 crore (rights issue, preferential issue), which was mainly utilised towards significantly retiring debt in FY21.

Outlook

We reiterate our BUY rating with unchanged target price of Rs 225 (2.1x EV/sales FY23E).