Item: Arvind Fashions Ltd.
Rating: 5
Author: HDFC Securities

Arvind Fashions (3QFY20): Performance par for the course. Maintain BUY

Buy: Arvind Fashions Ltd.

HDFC Securities

Given the brand equity of AFL's power brands (60% of sales), a recovery in this segment is a foregone conclusion. This coupled with multiple margin levers and an increasingly lighter expansion strategy should ensure AFL's return profile has a U-shaped recovery. (6.3% by FY22 vs -3.7% in FY20E). We remain circumspect on the value fashion play though, given AFL's lack of execution history. Valuations at <1x FY20E Power brand sales seem undemanding. While we maintain our estimates, a DCF-roll-over to FY22 leads to a marginal revision in TP to Rs. 460/sh (earlier Rs. 450), implying 11x F22 EV/EBITDA). Reiterate BUY. Near double-digit (-9.8%) top-line de-growth was par for the course for Arvind Fashion (AFL) as FY20 is all about 1. fixing working capital woes in brands biz via reducing reliance on long-credit cycle accounts (MBOs), 2. Reining in losses of the value fashion play Unlimited. 3). Non-core brand exits.

Comment

Name	Companies Held
Hitesh Ramji Javeri and As...	50
Mahendra Girdharilal	50
Sangeetha S	50
Sharad Kanayalal Shah and ...	50
Dheeraj Kumar Lohia and As...	47

Name	Companies Held
Hdfc Trustee Company Limited	89
Birla Sun Life Trustee Com...	50
General Insurance Corporat...	50
Government Pension Fund Gl...	50
Hdfc Standard Life Insuran...	50

Name	Returns(%)
Name	Week	Month	Year
Quant Active Fund - Reg - G	1.64%	6.27%	85.66%
HDFC Growth Opportunities Fund - Reg - G	1.40%	3.46%	68.33%
UTI - Core Equity Fund - Reg - G	1.12%	4.02%	68.10%
Quant Focused Fund - Reg - G	1.99%	5.79%	65.69%
UTI - Equity Fund. - Reg - G	2.19%	4.99%	64.90%

Name	Returns(%)
Name	Week	Month	Year
Kotak Small Cap Fund - Reg - G	1.28%	5.20%	115.21%
Reliance Small Cap Fund - Reg - G	0.22%	4.51%	107.03%
L&T Emerging Businesses Fund - Reg - G	0.65%	5.57%	105.55%
IDFC STERLING VALUE FUND - Reg - G	1.52%	6.25%	101.75%
Aditya Birla Sun Life Small Cap Fund - Reg - G	0.43%	4.00%	101.05%

Name	Returns(%)
Name	Week	Month	Year
ICICI Prudential Smallcap Fund - Reg - G	-1.06%	6.01%	107.44%
HDFC Small Cap Fund - Reg - G	-0.09%	4.94%	103.65%
Quant Mid Cap Fund - Reg - G	-0.46%	1.91%	83.70%
Templeton India Value Fund (erstwhile known as Templeton India Growth Fund) - Reg - G	1.04%	2.44%	78.67%
Reliance Growth Fund - Reg - G	1.53%	7.33%	76.48%

Arvind Fashions (3QFY20): Performance par for the course. Maintain BUY

Now Trending