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.
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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