Future Lifestyle Fashions Ltd. share price target

We believe that Brand Factory will continue to reel under the stress of a consumption slowdown for a couple of quarters. Ergo, the management has re-calibrated its expansion plans from 25 to 18 stores in FY20. While Brand Factory struggles, we believe Central will chug along and add 5 stores annually. We revise our DCF based TP downwards to Rs. 500 (earlier Rs. 550) which largely mimics the downward revision in FY21/22 EBITDA estimates by 8.8% and 11% respectively. Maintain BUY FLFL's revenue grew 3.1% YoY to Rs. 16.7bn (4.4% below estimated Rs. 17.4bn). Revenue was mainly impacted by the poor performance of its off-price format Brand Factory. While, top-line disappointed, margins were protected. Gross margins grew by 146 bps YoY to 34.9% (vs est: 34.5%). Adj. EBITDA margins (Pre-IND-AS) stood at 10.2% (vs est: 8.4%). The beat was a function of trickledown effect of a depressed top line. However better than expected cost efficiencies helped reduce the operational beat. The company reported Adj. PAT at Rs 0.57 bn.

Our comparative analysis of the business model of Future Lifestyle Fashions' (FLFL) Brand factory with similar leading global off-price retailers suggests that this format offers FLFL a strong growth opportunity and an upper edge over peers with department store formats. In addition, these formats offer good profitability metrics that indicate Brand Factory can achieve higher margins and ROCE. Value retailers are witnessing faster & consistent growth, better profitability and market...

Sales grew by 8% to Rs10.7bn, marginally lower than expectation owing to weak SSG of 5%. EBITDA declined by 5%, below our expectation by 3%, due to steep 28% increase in other overheads, led by higher marketing spends. Overall SSG at 5% was affected by weak 1% SSG in Central due to reduction in EOSS from 10 weeks to 4 weeks. Brand Factory reported strong 14% SSG. The company has raised Rs1.7bn through preferential issue to L Catterton Asia by issuing 3.8mn shares at a price of Rs445 each (2% equity dilution). Strategic investment by L...

After the success of Free Shopping Weekend (FSW) in 2016, Future Lifestyle Fashions Ltd (FLFL) announced FSW 2.0, which was spread over 22-26 Nov'17. FLFL has reported c.50% growth in FSW 2.0 with a total footfalls of 1.1mn shoppers. Issues in supply chain, change in positioning, coupled with higher discounts resulted in third party brands outperforming its owned/licensed brands. FLFL is focusing on 6 Power Brands with revamped designs, merchandising and supply chain to revive growth. of its debt. We expect the lower interest rate to curtail interest cost by c.Rs100mn each in FY19E and FY20E (versus our earlier estimates)....