Emkay Global Financial's report on Aditya Birla Fashion
Revenues declined 5% to Rs18bn, in line with expectations and affected by the lockdown in March. Higher fixed-cost structure and increased costs of expansion in Q4 resulted in a sharper fall in profitability with comparable EBITDA loss of Rs569mn. Around one-third of the stores have reopened so far, with more expected to open in coming weeks. Management highlighted several initiatives to reduce its high cost structure and become leaner in the future. Favorable outcome of rental negotiations may provide upsides. Debt has increased to Rs27bn, however, management expects that conversion of inventory into sales releasing substantial cash, lower capex, and fund infusion through rights issue of Rs10bn will further improve the liquidity and help lower debt in future.
We cut our FY21-22 forecasts sharply due to the extension of the lockdown and delays in reopening of stores against our earlier expectations. Cost saving and balance sheet strengthening initiatives are positive. We maintain Buy/OW in EAP, with a revised TP of RS150 (from Rs220), based on 20x FY22 comparable EBITDA.
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