Buy This Retail Apparel Stock, Can Rally By Upto 27.6%: Emkay Global

Emkay Global has asked investors to buy shares of Aditya Birla Fashion & Retail Limited, with a target price of Rs 295 per share. The brokerage sees a potential upside of 27.6% on this stock The brokerage has shared a coverage report about the large cap company, which is a part of Aditya Birla Group.

Aditya Birla Fashion & Retail, lage cap company was incorporated in 2007 operating in retail sector. It 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). Post the consolidation, PFRL was renamed Aditya Birla Fashion and Retail Ltd.

As a fashion conglomerate, it has a strong network of 3,468 brand stores across the country. It is present across 28,000+ multi-brand outlets and 6,500+ points of sales in department stores across country till March 31, 2022. The current market capitalisation of retail company is Rs 21,806.31 crore.

The share price of Aditya Birla Fashion and Retail Ltd has corrected sharply as per the brokerage report. The stock price has corrected by ~35% from its Nov-22 peak, likely triggered by a subdued
demand environment for value-format Pantaloons (~35% of consol. revenue in FY23E) and continued growth investments in Madura brands (Lifestyle + Innerwear/Others + Ethnic + Reebok + D2C; rest: 65% mix). However, we see such a hefty correction as unwarranted, as the Lifestyle business (53% mix) maintained industry-leading per-EBO recovery of ~140% in 9MFY23 (vs. 9MFY20). Innerwear (~5% mix) is witnessing strong trends, with ~40% CAGR over FY18-23E (vs. 25% for PAG).

Valuation of the stock explained

According to Emkay Global, "Aditya Birla Fashion & Retail Limited had provided a target of delivering 11% EBITDA margin by FY26 on Investor day in March -21. But incremental events in the form of Covid (2nd/3rd waves), investments in Reebok/D2C and a macro-led slowdown for Pantaloons should defer this target, in our view. We remain conservative and expect ABFRL to deliver ~7% consol. EBITDA margin in FY26E; a potential upside risk to our estimates is better performance by the company."

Last traded price of the stock of the large cap company is Rs 229.85 per share, it was down by 0.71%. Its 52-week high is Rs 359.40 per share and low is 221.15 per share.

Disclaimer:

The stocks have been picked from the brokerage report of Emkay Global, Greynium Information Technologies and the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.