Aditya Birla Fashion and Retail Ltd. share price target

28 May 2020 Revenue decline of 5% was in-line, while EBITDA loss of INR569m was a big miss v/s the expectation of INR736m in profit. This was due to a lower-than- expected reduction in fixed cost during the COVID-19 lockdown in Mar20. We cut our revenue by 9%/11% in FY21E/FY22E, building the impact of the extended lockdown and its repercussion on the slow-moving Apparel industry. Expect revival in FY22E, with EBITDA of INR6.3b, 35% growth over FY20. Revenue was down 5.1% YoY to INR18.2b (in-line) as operations were impacted due to COVID-19. Management indicated that normalized growth without the COVID-19 impact would be 13% YoY. The gross margin shrank 180bp YoY to 51.3% (220bp miss); EBITDA (pre-Ind- AS 116) turned to loss of INR569m (v/s expectation of INR736m and INR1.3b in 4QFY19). Normalized EBITDA without the COVID-19 impact should increase 1% YoY. PBT too turned to loss of INR1.

Strong focus on retail and a shift to the 12 season model is likely to help improve assortment freshness footfall enabler; ergo sustain growth momentum across anchor formats. We continue to prefer strong Brands and value fashion plays and ABFRL is well placed to milk both categories. We revise our DCF-based TP to Rs. 290/sh (earlier Rs. 250). Revision is a function of 1. Revision in our EBITDA estimates (1.5-2%) for FY21/22 respectively and 2. DCF-roll-over to FY22. ABFRL's revenue grew 12.3% YoY to Rs. 25.6bn (3.5% above estimated Rs. 24.76bn) as both anchors - Madura and Pantaloons performed well and beat expectations. Adj. EBITDA margins (Pre-IND-AS) stood at 8.4% (vs est: 7.1%). The beat was a function of 1. GM trickle down effect, 2. Improved profitability in Pantaloons and 2. Reducing losses in the fast fashion biz. The company reported losses for the quarter (Rs. Rs. 334mn) primarily due to a higher tax outgo (courtesy a one-time deferred tax charge of Rs. Rs. 1.43bn)

With liquidity stress persisting in wholesale channels, ABFRL has capitalised its own retail channel to fuel growth in its lifestyle brand division (Allen Solly, Van Heusen, Louis Philippe, Peter England). ABFRL added a record number of stores in a quarter (91 stores) taking the total store count to 2187. Furthermore, robust SSSG (15% YoY) led retail sales to grow 30% YoY to | 642.0 crore. However, a decline in wholesale channel (down 4% YoY to | 394 crore) led overall revenue from lifestyle brands to increase 14% YoY to | 1295.0 crore. Apart from its core portfolio of men's category, growth...

6 February 2020 ABFRL delivered a strong beat v/s expectations on all fronts in a challenging demand environment, led by healthy same store performance for both Lifestyle and Pantaloons. We have largely maintained our revenue/EBITDA estimates to deliver CAGR of 14%/25% over FY19-21E. Lifestyle/Pantaloons is expected to deliver 11%/25% EBITDA CAGR driven by healthy store adds, SSSG coupled with improving margins and reducing losses in Fast Fashion and innerwear segment. 3QFY20 revenue was up 12.3% YoY to INR26b (in-line) on the back of strong performance across businesses. EBITDA increased 25% YoY to INR2.2b (12% beat) with margin improvement of 80bp to 8.4%. Gross margin expanded 210bp YoY to 52% (150bp miss). Revenue/EBITDA of Lifestyle brands grew 14%/4.5% YoY to INR13b/INR1.4b due to strong 15% SSSG in the retail segment and focus on womens/kids- wear (growth 35%/21%). Revenue/EBITDA for Pantaloons grew 12.7%/24% YoY to INR10.

Inspite of a moderate macroeconomic environment, ABFRL has reported a strong growth of 13% YoY on a strong base of 23% against estimates of 12% growth driven by growth across segments.

Category extension fuelling growth for lifestyle brands Lifestyle brands (Allen Solly, Van Heusen, Louis Philippe, Peter England) grew 15% YoY to | 1254.0 crore driven by healthy like to like (LTL) sales growth of 7.0%. Growth was witnessed across all distribution channels with e-commerce growing at a rapid pace. Store addition pace remained robust, with ABFRL adding 39, 116 stores in Q2FY20, H1FY20 (2096 stores, 2.7 million sq ft), respectively. Apart from its core portfolio of men's category, growth was fuelled by category expansion, with women's wear and kids...

13 November 2019 ABFRL reported strong 2QFY20 performance, backed by healthy SSSG in both Lifestyle/Pantaloons of 7%/10.4%. Overall, revenue was up 14.4% YoY to INR23b (in-line) on the back of strong revenue growth of Lifestyle brands/Pantaloons at 15%/16.3% to INR12.5b/INR9.2b. EBTDA grew 15% YoY to INR1.6b (in-line) on pre IND-AS 116 basis with flat 7.1% margin due to higher mix of low-margin Pantaloons/other businesses, which saw healthy margin improvement. PAT declined 28.7% to INR305m due to deferred tax of INR247m; adjusted PAT stood at INR551m. For 1HFY20, against OCF of INR6.8b, working capital increased by INR3.5b, with INR3.

Inspite of a moderate macroeconomic enviorment, ABFRL has surprised positively with a strong growth of 15% YoY against estimates of 9-10% growth driven by growth across segments.

Lifestyle brands reported revenue growth of 6% YoY to | 1006 crore led by LTL growth of 3.2%. Revenues from e-commerce channels (~7% of revenues) continued to grow at a rapid pace of 42% YoY. Women's wear has witnessed robust traction with revenue growth of 48% YoY. Store addition pace remained robust, with ABFRL adding 77 stores in Q1FY20 (2057 stores, 2.6 million sq ft). ABFRL had recently rolled out a pilot venture called, Peter England Red' stores, mainly capturing the lower price point categories in non-metro cities. It has now added 100 stores in less than a...