Neutral Aditya Birla Fashion and Retail; target of Rs 100: Motilal Oswal

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

We interacted with the management of Aditya Birla Fashion and Retail (ABFRL) to discuss the growth prospects and profitability outlook for the company’s various segments and other focus areas. The key takeaways are as follows: Pantaloons is focusing on revamping its retail identity while focusing on improving margins by ~300bp over the next five years through improved SSSG and higher own-brand salience. The value retail format OWND! is breaking even on the store level and would be scaled up to 100 stores by the end of FY26, with an accelerated ramp-up from FY27. Designer-led ethnic brands are highly profitable (~20%+ margin). ABFRL’s target is to increase revenue contribution to ~INR20b from ~INR8b over the next few years, with further margin improvement to ~25%. The store rationalization and old inventory clearance in TCNS are largely behind, with store additions likely from 2HFY26. Management expects losses to reduce by ~50% in TCNS in FY26, with break-even targeted in FY27.

Outlook

We reiterate our Neutral rating on ABFRL with a revised TP of INR100, as we await improvement in execution towards consistent growth and sustained profitability before we turn more constructive on the stock.