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Emkay Global
Aditya Birla Fashion (Buy)
Target: ₹340
CMP: ₹254.4
Our checks have revealed encouraging festive trends across channels. Online fashion GMV has almost doubled and physical retail channels are nearing full recovery for most players. Recent 10 per cent correction in ABFRL provides an opportunity to add, in our view.
ABFRL stood out in terms of per-store recovery for EBOs at nearly 110 per cent in Q2 vs. peers at 70-80 per cent. A faster recovery in the relatively more impacted Pantaloons segment and the strong pick-up in the wholesale channel (MBO+LFS) on festive stocking, can surprise ahead.
Pick-up in store additions from H2 and new categories, mainly Ethnic, offer strong growth visibility. ABFRL's entry into ethnic-wear, accounting for nearly 30 per cent of the industry, boosts the total addressable market significantly. Its faster scale-up can offer potential upsides.
We estimate Revenue/EBITDA CAGRs of 11 per cent/25 per cent over FY20-24, led by faster recovery trends, aggressive portfolio/store expansion and improving efficiencies. Valuations at about 25x Dec'23 pre-IndAS EBITDA are at a discount to peers.
Reiterate Buy with a Dec'22E TP of ₹340, based on 30x Dec'23 pre-IndAS EBITDA.
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