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Buy This Bluechip Retail Stock For 26% Upside, Says Motilal Oswal


Broking firm, Motilal Oswal has recommended buying the stock of Aditya Birla Fashion and Retail for an upside target of 26% on the stock.


Buy Aditya Birla Fashion and Retail stock with a price target of Rs 350

Buy Aditya Birla Fashion and Retail stock with a price target of Rs 350

Aditya Birla Fashion and Retail is home to some of India's most iconic brands - Louis Philippe, Van Heusen, Allen Solly and Peter England - all market leaders within their segment.

Apart from this it also owns Pantaloons and fast fashioned brands. Motilal Oswal has set a price target of Rs 350 on the stock of Aditya Birla Fashion and Retail. According to the broking firm the management expects a strong and a sustained recovery on the back of tailwinds from the festive season and opening up of the economy after the lifting of COVID-related restrictions.

In the last quarter, the company witnessed a margin improvement on an improved share of Retail and private labels, lower mark downs, and cost control measures.

The management has also indicated that it would continue with its aggressive store expansion plans across segments. Ethnic Wear and Pantaloons will see over 100 new stores annually.

Gross margins see an improvement

Gross margins see an improvement

Gross margins at Aditya Birla Fashion and Retail improved significantly (590 basis points YoY) to 53.4% (340 basis points above pre-COVID levels) on lower mark downs and higher share of private labels. EBITDA came in 43% higher than our estimate at Rs 3.1b v/s an operating loss of Rs 76 million in 2QFY21 (and Rs 3.3 billion in 2QFY20). Net profit stood at Rs 59 million v/s an estimated loss of Rs 835 million.

Valuation and view

"We value Aditya Birla Fashion and Retail on a SoTP basis, rolling forward our valuation to Sep'23E. We assign an EV/EBITDA of 16x/15x to Lifestyle/Pantaloons and 1x EV/sales to other businesses, slightly upping our multiple, given the quick recovery and improving Balance Sheet. We arrive at a target price of Rs 350 per share (from Rs 280 earlier). We maintain our Buy rating," the brokerage has said.

The shares of Aditya Birla Retail were last seen trading at Rs 278.25 on the NSE.



The stock has been picked from the brokerage report of Motilal Oswal Financial Services Limited. 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.

Read more about: stocks to buy
Story first published: Wednesday, November 24, 2021, 11:01 [IST]
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