MOSL: ADITYA BIRLA FASHION & RETAIL (Buy)-Good performance across verticals
ADITYA BIRLA FASHION & RETAIL: Good performance across verticals
(ABFRL IN, Mkt Cap USD2.3b, CMP INR211, TP INR250, 19% Upside, Buy)
- Stellar growth led by strong SSSG: ABFRL reported strong 2QFY20 performance, backed by healthy SSSG in both Lifestyle/Pantaloons of 7%/10.4%. Overall, revenue was up 14.4% YoY to INR23b (in-line) on the back of strong revenue growth of Lifestyle brands/Pantaloons at 15%/16.3% to INR12.5b/INR9.2b. EBTDA grew 15% YoY to INR1.6b (in-line) on pre IND-AS 116 basis with flat 7.1% margin due to higher mix of low-margin Pantaloons/other businesses, which saw healthy margin improvement. PAT declined 28.7% to INR305m due to deferred tax of INR247m; adjusted PAT stood at INR551m. For 1HFY20, against OCF of INR6.8b, working capital increased by INR3.5b, with INR3.1b spent on capex/ acquisitions and INR2.7b interest cost, thus increasing net debt by INR3.6b.
- Concall highlights: (1) Planning to open 400 Lifestyle brand stores in FY20; 30-40 People stores should move to Lifestyle. (2) Targeting mid-teens revenue growth for Lifestyle brands and Pantaloons with 2-3% margin improvement for Pantaloons. (3) E-commerce contributed high/low single-digit revenues for Lifestyle/Pantaloons; should see strong growth momentum going forward.
- Growth expectations consistent: We have largely maintained our revenue/EBITDA estimates at CAGR of 13.5%/26% over FY19-21E. Lifestyle/Pantaloons are expected to deliver 11%/28% EBITDA CAGR growth, driven by healthy store adds and SSSG. Fast Fashion is reaching break-even, while the ‘Others’ segment led by innerwear continues to record accelerated growth; however. It is expected to remain loss-making until FY21E.
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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