Buy Aditya Birla Fashion; target of Rs 200: Motilal Oswal

Motilal Oswal's research report on Aditya Birla Fashion

ABFRL acquired 51% stake in Sabyasachi Couture for INR4b. Of this, about INR1b would be through the primary route, while the rest would be via the secondary market. n The deal values Sabyasachi at an EV of INR7.8b, with FY20 EV/Sales of 2.8x and EV/EBITDA of 15x. n The ‘Sabyasachi’ brand is engaged in Luxury Designer Apparel and accessories. With a revenue of INR2.7b (9% CAGR over FY18-20) and 20% EBITDA margin, it constitutes a mere 3% of ABFRL’s overall revenue.

Outlook

ABFRL has consistently improved its earnings graph, with a revenue/EBITDA CAGR of 37%/75% over FY14-19. If dented FY20 growth is taken into consideration, revenue/EBITDA CAGR would stand at 32%/55% over FY14-20 (FY20 pre-Ind AS 116 EBITDA of INR4.5b).