Neutral Aditya Birla Fashion and Retail; target of Rs 335: Motilal Oswal

Motilal Oswal's research report on Aditya Birla Fashion and Retail

Aditya Birla Fashion and Retail (ABFRL)’s consol. revenue grew 13% YoY,driven by TCNS consolidation and improvement in Lifestyle’s LTL growth. ABFRL’s EBITDA was up 12% YoY (4% beat) as improvement in Pantaloons’profitability was offset by ~300bp YoY margin contraction in Lifestyle. ABFRLposted a net loss of INR2.1b in 2Q (INR13.6b cumulative loss since 4QFY23). We lower our FY25-26 revenue estimate by 3%/6% on lower store additions,while our EBITDA estimates are broadly unchanged. We build in a CAGR of 10%/17% in revenue/EBITDA over FY24-27E. Webelieve our estimates of profitability improvement in newer segments areoptimistic. Delays in ramp-up in profitability could pose downside risks. We value ABFRL on the SOTP basis. We assign EV/EBITDA multiple of 15x to both ABLBL and Pantaloons businesses and EV/sales of 1x to other businesses ofABFRL (demerged) on Dec’26E. We reiterate our Neutral rating with a TP ofINR335.

Outlook

We value ABFRL on the SOTP basis. We assign EV/EBITDA multiple of 15x to bothABLBL and Pantaloons businesses and EV/sales of 1x to other businesses of ABFRL(demerged) on Dec’26E. We reiterate our Neutral rating with a TP of INR335.