Brokerage firm Anand Rathi is suggesting investors buying the stocks of Aditya Birla Fashion and Retail (ABFRL). It is a reputed large-cap company with a market capitalization of Rs. 24,208 crore.
Target Price, CMP, and performance: ABFRL
The Current Market Price (CMP) of Aditya Birla Fashion and Retail is Rs. 267. Anand Rathi has estimated a Target Price for the stock at Rs. 358. Stock is anticipated to give a 34.08% return, in 1 year.
|Current Market Price (CMP)||Rs. 267|
|Target Price||Rs. 358|
|1 year return||34.08%|
|52 week high share price||Rs. 322.00|
|52 week low share price||Rs. 184.00|
Aditya Birla Fashion and Retail's quarterly results were healthy despite Covid'19 disruptions in Jan'22. The company's Q4 FY22 consolidated revenue/EBITDA grew ~25%/59% to Rs. 22.8bn/Rs. 3.7bn. The gross margin has expanded 210bps to 55.7% (quarterly the highest of the last couple of years). The EBITDA margin expanded ~340bps y/y to 16.3%. Its PAT was reported at Rs. 319m vs. ~Rs. 2bn loss in Q4 FY21. The company's flagship Pantaloons' revenue increased 13% y/y to Rs. 6.8bn; while EBITDA margin slid to 12.1% (14.4%). Madura Lifestyle brands reported 34% y/y revenue growth to Rs. 13.4bn; its EBITDA margin was 23.2% (17.5% a year ago). However, net debt was higher by 5% y/y to Rs. 5,303mn.
Anand Rathi Mentions Advantages
Giving the stock a buy rating, the brokerage firm has mentioned, "Its FY22 performance was good on the back of easing Covid'19 restrictions, investments in network expansion, inorganic acquisitions and e-commerce. Focusing on long-term strengthening of its balance sheet so that its expansion over the next 3-5 years is not hampered, it approved raising Rs. 22bn through a primary issue to GIC. It plans to use this capital to accelerate its growth engine built around its current brands. We raise our FY23e/24e capex to ~Rs. 6.5-7bn, and, hence our revenue assumption 6%/10% over FY23/24. We reduce our FY23e/24e EBITDA margin to 15%/15.3% as we factor in more marketing spends, higher other overheads and investments. We factor in revenue/EBITDA CAGRs of ~34%/42% over FY22-24."
GIC will be investing Rs. 22bn in ABFRL for a ~7.5% stake on the latter issuing equity shares and warrants preferentially to the former. The company will issue 10.2m shares and 65.8m warrants at ~Rs. 289 each (an 8% premium to the ruling price). ABFRL will receive Rs. 7.7bn now, followed by Rs. 14.3bn over 18 months. With the proceeds, it plans to accelerate growth in its present portfolio and incur ~Rs. 7bn organic capex in FY23.
About the stock's risk, Anand Rathi has mentioned keen competition cutting revenue growth.
About the company:
Aditya Birla Fashion and Retail Ltd. (ABFRL) emerged after the consolidation of the branded apparel businesses of Aditya Birla Group comprising ABNL's Madura Fashion division and ABNL's subsidiaries Pantaloons Fashion and Retail (PFRL) and Madura Fashion & Lifestyle (MFL) in May 2015. ABFRL is a part of the Aditya Birla Group, a global conglomerate, in the league of Fortune 500. Anchored by an extraordinary force of over 140,000 employees, belonging to 100 nationalities, the Group is built on a strong foundation of stakeholder value creation. Today, over 50% of Group revenues flow from overseas operations that span 36 countries in North and South America, Africa and Asia.
ABFRL's Lifestyle Brands are Louis Philippe, Van Heusen, Allen Solly and Simon Carter - catering to India's Premium Consumers. Pantaloons, a division of ABFRL, is one of India's most preferred fast fashion destinations among large retail format stores. Forever 21 is the company's significant youth business.
The above stock was picked from the brokerage report of Anand Rathi. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.