Neutral Aditya Birla Fashion and Retail; target of Rs 285: Motilal Oswal

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

Aditya Birla Fashion and Retail (ABFRL)’s revenue growth remained muted at ~3% YoY (in line) in 3QFY25. The growth was driven mainly by Ethnic and TMRW (to be part of demerged ABFRL), whereas growth remained muted in Lifestyle Brands (robust LTL offset by weak wholesale) and Pantaloons (shift in Pujo dates). EBITDA was up 15% YoY (11% beat), driven by broad-based improvement in profitability, with ~150bp YoY expansion in consolidated EBITDA margin. Recently, ABFRL successfully raised USD490m (INR42.4b) through QIP and preferential issuance to the promoter and Fidelity group, resulting in the complete deleveraging of the company. Management expects to complete the demerger in the next 2-3 months. After the demerger, ABLBL will start with a net debt of INR7b, while demerged ABFRL will have a net cash of INR13b.

Outlook

We value ABFRL on the SOTP basis. We assign EV/EBITDA multiple of 14x to both ABLBL and Pantaloons business and EV/sales of 1x to other businesses of ABFRL (demerged) on FY27E. We reiterate our Neutral rating with a TP of INR285.

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