MOSL: Aditya Birla Fashion and Retail (Buy)-See healthy expansion led growth ahead; leverage a key monitorable
Aditya Birla Fashion and Retail: See healthy expansion led growth ahead; leverage a key monitorable
(ABFRL IN, Mkt Cap USD3.6b, CMP INR290, TP INR350, 21% Upside, Buy)
- Revenue recovered to 89% of pre-COVID levels (2QFY20) at INR20.5b, with a 340bp improvement in gross margin. This translated into an EBITDA/PAT improvement to INR3.1b/INR59m.
- We factor in a revenue/EBITDA CAGR of 7%/16% over FY20-23E, and estimate Ind AS 116 EBITDA at INR7.3b in FY23E. Net debt remains a key monitorable as earnings in 2HFY22 and the final tranche of the rights issue could offset capex and WC spends. We maintain our Buy rating.
EBITDA/PAT turn positive
- Consolidated revenue grew by 2x YoY to INR20.5b (7% beat), or 89% of pre-COVID levels (2QFY20). Estimated LTL fell 11% as it saw limited store additions. TRENT clocked 25% YoY revenue growth, with a 46% addition in its area footprint.
- Gross margin improved significantly (590bp YoY) to 53.4% (~340bp above pre-COVID levels) on lower mark downs and higher share of private labels. EBITDA came in 43% higher than our estimate at INR3.1b v/s an operating loss of INR76m in 2QFY21 (and INR3.3b in 2QFY20). Net profit stood at INR59m v/s an estimated loss of INR835m.
- Net debt stood at INR8.7b v/s INR5.3b/INR12b as of FY21/1QFY22 end. The profitability and working capital unwind have reduced net debt QoQ.
- Lifestyle: Revenue grew by 2.2x YoY to INR11.5b (92% of pre-COVID levels), with EBITDA up by 3.3x YoY at INR2.1b. Pantaloons: Revenue grew 80% YoY to INR6.6b (27% below pre-COVID levels), with EBITDA at INR1.2b. Ethnic Wear: Revenue grew by ~5.8x YoY to INR0.6b, with an EBITDA of INR10m v/s an operating loss of INR70m QoQ and INR40m YoY.
Aditya Birla Fashion and Retail Limited, formerly Pantaloons Fashion & Retail Limited, is a fashion and lifestyle company. The Company is engaged in providing branded fashion apparels and accessories, and the retail sale of clothing, footwear and leather articles in stores. It operates through two segments: Madura Fashion & Lifestyle, and Pantaloons. Its Madura Fashion & Lifestyle segment is engaged in manufacturing and distribution of branded fashion apparel and accessories, and comprises over 1,800 exclusive brand outlets (EBOs) and approximately 150 value stores. Its Pantaloons segment is engaged in retailing of apparel and accessories, and comprises over 160 stores, including one Pantaloons Kids store and approximately 30 Factory Outlets. The Pantaloons segment has a diversified customer base with men, women, kids and non-apparels. The Company's brands include Louis Philippe, Van Heusen, Allen Solly and Peter England.
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