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JM Financial
Aditya Birla
Fashion (Buy)
CMP: ₹147.50
Target: ₹215
Aditya Birla Fashion and Retail Ltd (ABFRL) emerged after the consolidation of the branded apparel businesses of Aditya Birla Group comprising ABNL’s Madura Fashion division and ABNL’s subsidiaries Pantaloons Fashion and Retail (PFRL) and Madura Fashion & Lifestyle (MF&L) in May 2015. Post the consolidation, PFRL was renamed ABFRL.
ABFRL is India’s No 1. Fashion Lifestyle entity with a combined revenue of ₹6,060 crore for FY16.
ABFRL reported better than expected topline-traction in 3QFY17 while profit performance of both segments was broadly inline. One key positive was Madura’s smart recovery in Oct (LTL +14 per cent) but demonetisation thereafter dragged the quarter’s LTL to -7 per cent (still better versus -10 per cent seen in 2Q). Pantaloons’ LTL slipping into negative (down 1.8 per cent) was disappointing more so since peers such as Westside (+9 per cent LTL in both 2Q and 3Q) and Shoppers Stop (+6.4 per cent LTL in 3Q vs +2.2 per cent in 2Q) maintained/improved momentum during the quarter, demonetisation notwithstanding. Management cites price-cuts as the reason for its decline. Madura’s strong brand-portfolio, coupled with steadfast management focus to turn Pantaloons around make us believe that bad times will not last forever.
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