February 20, 2017 / 17:15 IST
Sales grew 2.4% YoY as greater presence in direct retail channel helped mitigate the impact of demonetization on the wholesale channel.Gross margin improved 120bps but EBITDA margin declined 70bps as negative operating leverage kicked in. EBITDA declined 3% YoY. Adjusted PAT grew 17% due to lower depreciation expenses (driven by store rationalization).
Outlook
We see long-term benefits from key strategic changes like closing unprofitable stores, expanding into smaller cities through franchise model and focusing on growing appeal to the youth and women consumers. Even low to mid double-digit sales growth will help it to recover from 9-year low EBITDA margin of 11%. Maintain BUY with revised TP of Rs 580 based on forward P/E of 29x (Rs 535 earlier).
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