Emkay Global Financial's research report on Aditya Birla Fashion and Retail
ABFRL’s Q2 EBITDA was slightly better than estimated, led by boost in Madura margin, albeit offset by muted revenue. Lifestyle/Pantaloons’ performance lagged peers’, but softness in Innerwear/Ethnic was in-line. ABFRL is confident of its leadership in Lifestyle and attributed the 12% Q2 LTL decline to shift in wedding season to Q3 and lesser participation in low-margin channels (margin: +450bps). With higher East mix+intense competition+inventory optimization, Pantaloons saw a 15% dip in LTL/600bps drop in margin. Festive commentary was muted, but ABFRL remains hopeful of pickup in the wedding period.
Outlook
Despite weak trends, ABFRL maintains its Pantaloons/Tasva store-count target; Innerwear expansion is curtailed, on weak Athleisure. Net Debt rose by Rs30bn in H1, owing to Rs16.5bn towards TCNS stake, Rs4bn for D2C investments, with the rest for capex/WC (festive mismatch). Pantaloons/D2C are grey areas, while Lifestyle/Reebok/Ethnic are doing well; retain HOLD with TP at Rs220.
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