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Analyst Meet Update - Aditya Birla Fashion and Retail - ICICI Direct

Posted On: 2021-03-01 23:26:29 (Time Zone: Arizona, USA)

At the recently held virtual ABFRL analyst meet, the company embarked on a five-year growth strategy plan with key emphasis on generating healthy FCF across business formats (cumulative FCF worth ~Rs. 1000 crore in FY22-26E) and RoCE of ~25% by FY26E. ABFRL has charted out growth strategies to become a ~US$2.8 billion entity (Rs. 21000 crore) by FY26E, translating to 15% CAGR in FY20-26E. It is betting big on the ethnic play (through latest acquisitions) with the category expected to grow at a fast rate (from Rs. 50 crore in FY20 to Rs. 2000 crore by FY26E). Innerwear segment, in a short span of time, has seen significant ramp up with revenues touching Rs. 280 crore in FY20 (launched in FY17). The management expects innerwear revenues to sustain healthy momentum driven by increased touch-points and post 32% CAGR in FY20-26E, with a target of achieving break-even by FY23E.

Valuation & Outlook

We believe focus on generating higher RoCE across business formats coupled with sales growth mainly driven through internal accruals augurs well for ABFRL. It has pared its debt from Rs. 3181 crore in Q2FY21 to Rs. 580 crore (through working capital release, right issues and fund infusion by Flipkart). Controlled working capital cycle, recovery in profitability and steady FCF generation would result in debt/EBITDA ratio falling to 0.6x by FY23E (6.0x in FY20). We continue to like ABFRL in apparel space owing to a strong brand positioning capturing various price points with robust brand recall. We maintain BUY with revised TP of Rs. 225 (earlier TP: Rs. 210).

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Shares of Aditya Birla Fashion and Retail Ltd was last trading in BSE at Rs.192.7 as compared to the previous close of Rs. 183.75. The total number of shares traded during the day was 650568 in over 6531 trades.

The stock hit an intraday high of Rs. 196.85 and intraday low of 182.6. The net turnover during the day was Rs. 124816028.

Source: Equity Bulls

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