Aditya Birla Fashion - Q2FY21 First Cut - ICICI Direct

(CMP: Rs. 153, MCap: Rs. 11857 crore)

Post re-opening of standalone stores and malls, revenue recovery was visible sequentially, however it continues to be below pre-covid levels. Overall revenue recovery rate reached ~ 45% in Q2FY21, with 95% of stores operational by end of September. Company continued on its strategy of significantly reducing cash burns through cost rationalisation measures (Rs. 417 crore cost savings in Q2FY21). This resulted in better than anticipated operational performance for Q2FY21. Company during the quarter has successfully raised first tranche of its right issue of Rs. 497 crore (Right issue: Rs. 1000 crore) which has helped in paying off its creditors and reduce borrowings to a certain extent (QoQ).

Q2FY21 Earnings Summary

- ABFRL reported revenue de-growth of 55.7% YoY to Rs. 1018.6 crore (I-direct estimate: Rs. 1075 crore). Revenue from Lifestyle brands (Allen Solly, Van Heusen, Louis Philippe and Peter England) de-grew by 58% YoY to Rs. 531.0 crore. Introduction of new category lines such as work from home, athleisure assisted in revenue recovery (Lifestyle brands pre-dominantly caters a formal wear). Furthermore, smaller towns have performed better with footfalls nearly recovering to pre-covid levels. Revenue from Pantaloons division declined by 60% YoY to Rs. 369 crore. E-commerce continued to grow at a rapid pace with 3x growth YoY. Share of private label brands inched up 500 bps YoY to 67% owing to strong sales in kids wear segment (which are primarily private labels). Revenue from other business (which includes innerwear & athleisure) de-grew by 16% YoY to Rs. 175 crore. The management indicated that the innerwear & athleisure bounced back the fastest, with sales reaching its pre-Covid levels.

- In order to minimize cash burns, the company significantly rationalized operating overheads by ~ Rs. 417 crore mainly through reduction in rental and employee expenses. For H1FY21 cost savings stood at Rs. 872 crore. In Q2FY21, employee expenses de-grew by 32% YoY to Rs. 169.1 crore, while rental expenses (pre-IND-AS 116) de-grew 45% YoY to Rs. 156.2 crore. Reported EBITDA loss (post IND-AS 116) came in at Rs. 1.7 crore vs. (I-direct estimate: Rs. 18.3 crore loss). PBT losses narrowed down significantly QoQ to Rs. 242.4 crore (I-direct estimate: Rs. 255.1 crore loss, Q1FY21: Rs. 533 crore). Owing to deferred tax asset (Rs. 61 crore) PAT loss came in at Rs. 181.3 crore (Q1FY21: Rs. 399.9 crore loss).

Through better inventory management (cash release worth Rs. 259 crore) and proceeds of right issue (Rs. 497 crore), company has paid off creditors to the tune of Rs. 550 crore and debt worth by Rs. 90 crore to Rs. 3159 crore (Q1FY21: Rs. 3250 crore). Company expects debt levels to come down to Rs. 2000 crore by end of FY21E (excluding the infusion of Flipkart deal worth Rs. 1500 crore). The management expects the Flipkart deal to be executed by Q4FY21E. It has retreated its stance of reaching revenue recovery rate of 70-80% by Q3FYFY21E and achieving normalcy levels by Q4FY21E. The focus on correcting the cost structure shall be pursued during the remainder of the year.

We will be coming out with a detailed report.

Shares of Aditya Birla Fashion and Retail Ltd was last trading in BSE at Rs.153.15 as compared to the previous close of Rs. 154.8. The total number of shares traded during the day was 169227 in over 4755 trades.

The stock hit an intraday high of Rs. 157.5 and intraday low of 150. The net turnover during the day was Rs. 25943724.

Source : Equity Bulls

Keywords