Motilal Oswal has given Buy recommendation for Aditya Birla Fashion and Retail recommended buy rating on the stock with a target price of Rs 240 in its researc with a target price of Rs. 240 in its research report issued on May 28, 2021
Motilal Oswal’s research report on Aditya Birla Fashion and Retail
Aditya Birla Fashion and Retail (ABFRL)’s revenue fell 2% YoY (in-line). However, healthy 200bp gross margin improvement (better than even pre-COVID levels) and strong cost management (aided by rent/employee cost savings) drove a 65% YoY EBITDA jump. Nevertheless, the company posted net loss of INR1.3b (in-line) on tax and other income impact. Given the lockdowns amid the second COVID wave, we cut our FY22 revenue/EBITDA estimate by 29%/74%, marginally above FY21 levels. However, we expect swift recovery in FY23E, keeping the revenue/EBITDA estimate intact at 13%/16% above FY20 stable-state financials. Maintain Buy.
We value ABFRL on an SOTP basis and assign an EV/EBITDA of 18x to the lifestyle brands and Pantaloons segment and EV/sales of 1x to other business – slightly upping our multiple given its better balance sheet position to bolster growth. Subsequently, we arrive at TP of INR240 (v/s INR220 earlier). Maintain Buy.