Buy Aditya Birla Fashion and Retail target of Rs 137: Anand Rathi

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Anand Rathi 's research report on Aditya Birla Fashion and Retail

Covid’19-related shutdowns hurt an otherwise healthy year for ABFRL. It reported 7.7% revenue growth and a 16% EBITDA drop in FY20. The `10bn rights issue as a risk-mitigation strategy would strengthen the balance sheet. The inherently strong brands and otherwise healthy working-capital cycle are its key strengths. The stock price has fallen ~36% since the lockdown with concerns about demand revival uncertainty and mounting debt. On the extended lockdown and higher fixed costs than previously expected, we cut our FY21e/FY22e revenue 6.3%/8.3%, EBITDA 44.5%/25.0%. We maintain our Buy rating with a lower TP of `137 based on 18x FY22e EV/EBITDA. We believe the ability to control fixed costs and demand revival are key monitorables.

Outlook

We maintain our Buy rating, with a lower TP of `137 (from `182), based on 18x FY22e EV/EBITDA.

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