Emkay Global Financial' research report on Aditya Birla Lifestyle Brands
ABLBL owns a portfolio of India’s leading fashion brands, having recently de-merged from ABFRL. Leveraging its moat around marketing, distribution, and consumer-centric innovation, ABLBL has successfully scaled up revenue of each of its multiple brands to >Rs10bn. With a goal of improving profitability, ABLBL has steadily moved away from channels that offer high discounts, along with shelving loss-making businesses (eg Forever 21), thus limiting overall revenue CAGR to a high single-digit in FY20- 25 (vs EBO channel: ~12% revenue CAGR; mix: ~45%). However, portfolio correction is largely done – ABLBL now expects to deliver a high-teen EBITDA CAGR in FY25-30, led by low double-digit topline CAGR and an overall 300bps margin gain. After a cycle of network consolidation in FY25, ABLBL’s asset-light franchisee-led expansion (~70%) is expected to pick up, with ~250pa store adds over FY25-30 (~8% CAGR). We now expect ABLBL’s working capital (WC) to stabilize at ~15% of sales, though better WC execution is a potential upside.
Outlook
We initiate coverage on ABLBL with BUY and Sep-26E TP of Rs170 (25x Sep27E pre-IndAS EBITDA).
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