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Buy Aditya Birla Fashion and Retail; target of Rs 350: Motilal Oswal

Motilal Oswal is bullish on Aditya Birla Fashion and Retail recommended buy rating on the stock with a target price of Rs 350 in its research report dated May 24, 2022.

May 25, 2022 / 05:08 PM IST

"India’s specialty chemicals industry is a decadal growth opportunity and it is still not too late to participate in the value creation process. We prefer CRAMS/CSM players Navin Fluorine (Navin) and PI Industries (PI) as they provide long-term earnings visibility. We also like UPL due to robust growth outlook and reducing debt concerns and SRF due to rising contribution from the chemicals business," JM Financial research report.

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


A strong recovery in business, particularly the Lifestyle segment, saw 59% YoY jump in ABFRL's 4QFY22 EBITDA backed by 25% YoY revenue growth and 210bp gross margin improvement. Net debt at INR5b too was comfortable even after building inventory for the upcoming season and new stores. - With healthy recovery and growth momentum across verticals, we raise our FY23E/24E EBITDA by 7-8%, modeling strong 40% EBITDA CAGR over FY22-24E. The INR22b fundraise from GIC should ensure a well-capitalized balance sheet and act as an enabler of the next 3-/5-year growth story. However, the 7.5% dilution and risk of capital mis-allocation could play havoc in the near term. Retain BUY.


Outlook


We value ABFRL on an SOTP basis, assigning EV/EBITDA of 21x to Lifestyle Brands, 18x to Pantaloons, and EV/sales of 1x to other businesses on FY24E. Subsequently, we arrive at our TP of INR350. Maintain BUY.


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first published: May 25, 2022 05:08 pm
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