Emkay Global, a reputed brokerage firm has recommended investors to buy the stock of Aditya Birla Fashion & Retail Ltd for a target price of Rs 360. According to the brokerage, the company has approved a Rs 22bn capital raise from GIC Singapore through a mix of fresh equity (Rs3bn) and convertible warrants (Rs19bn) at Rs289/share.
As mentioned above, the brokerage has estimated a target price of Rs 360 for the stock of Aditya Birla Fashion & Retail Ltd. The Current Market Price (CMP) of the stocks closed on 25th May 2022 is Rs 256.45. With the CMP and the target price estimated by the brokerage, the stock has the potential to gain 40.38% returns in a year. In the last 1 year, it has performed well and gained over 30% returns. Whereas, in the last 1 week, it has fallen near 8%. It touched the 52-week low level at Rs 184 on 25 May 2021 and 52 weeks high at Rs 322 on 7 April 2022.
Strong Franchise, Robust expansion plans aided by fund raise
According to Emkay Global, the company's, top-line grew ~22%, led by 34% growth in Lifestyle and 13% growth in Pantaloons. Lifestyle growth was led by 71% growth in the wholesale channel, while physical retail/other channels delivered a healthy 25%/16% growth. In line with recent trends, Lifestyle EBOs saw strong traction with Rev/sqft ~15% higher than pre-Covid levels despite operational challenges in the first half of Q4. While store additions picked up in Pantaloons with 16 new additions, rev/sqft was still ~10% below pre-covid levels. However, Aditya Birla Fashion & Retail expects to get back to near pre-Covid levels in FY23. Compared to recent trends, Innerwear growth was slower at ~15% in Q4 and 33% in FY22. Ethnic business reported sales of Rs1bn (up 2.5x), with an annual run rate of Rs4bn. Going ahead, it expects store additions to pick up with ~400/80/70 additions expected in Lifestyle/Pantaloons/Ethnic segments in FY23E vs. 143/31 store additions for Lifestyle/Pantaloons in FY22. Capex is expected to be ~Rs7bn in FY23E for new store additions, back-end infra and digital capabilities. Aditya Birla Fashion & Retail had a net debt of Rs5bn as of FY22-end.
The lifestyle segment led margin gains
EBITDA margins improved ~260bps to 17%, led by a 570bps gain in Lifestyle and a ~230bps decline in Pantaloons. Strong SSG reflected in strong margin gains for lifestyle, while weaker SSG led to a margin decline in Pantaloons. Aditya Birla Fashion & Retail expects a pick-up in discretionary expenses and strong expansion to impact margins from ~19% in H2. "We remain conservative with 17-18% margin expectations over FY22-25E," the brokerage said.
Emkay Global Suggests Buy For A Target Price of Rs 360
"Strong recovery trends, aggressive expansion plans and an improving margin profile should drive healthy revenue/EBITDA CAGRs of 15%/28% over FY20-25E. RoIC (ex-goodwill) is expected to improve to ~30% by FY25. Retain Buy with a revised Target Price of Rs 360 (26x Jun'24E pre-IndAS116 EBITDA vs. 28x FY24E earlier). The reduction in multiple is due to 3M roll-over and higher WACC," Emkay Global has said.
About The Company - Aditya Birla Fashion & Retail Ltd.
Aditya Birla Fashion and Retail Ltd. (ABFRL) is a Lifestyle Brand and home to some of India's most iconic brands including Louis Philippe, Van Heusen, Allen Solly and Peter England - all market leaders within their segment. With a market cap of Rs 24,150 crore, the company is one of India's leading fashion & retail brands. 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 America, South America, Africa and Asia.
The stock has been picked from the brokerage report of EMkay Global. 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. Goodreturns.in advises users to check with certified experts before taking any investment decisions.