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Emkay Research
Future Lifestyle (Buy)
CMP: ₹465.95
Target: ₹575
Future Lifestyle Q1FY20 results came in marginally below our expectations, with revenues growing 17 per cent (below estimate by 5 per cent) due to SSSG (same store sales growth) moderation. Adjusted for IndAS116, Ebitda rose 20 per cent and was in line, while PAT fell 7 per cent on higher depreciation.
The early end-of-season sales (EOSS) and higher discounting by peers affected Brand Factory’s (BF) SSSG, which should be temporary. Management plans to go aggressive on growth by increasing its value proposition, which may marginally affect margins.
BF franchise’s strong value proposition, aggressive expansion pace and increasing cost efficiencies in Central provide healthy growth and profitability outlook. Improvements in working capital and ROCE and debt reduction (in FY21E) should be the positive triggers.
We cut our FY20/21E EPS by 12 per cent/18 per cent, factoring in higher depreciation. However, given a strong growth outlook, valuations at 13x FY21E EV/EBITDA (IGAAP) look attractive. Maintain ‘Buy’ with a target price of ₹575 based on 18x September 20E EBITDA and OW (overweight) stance in sector EAP.
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