Buy Aditya Birla Fashion and Retail; target of Rs 130: ICICI Securities

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ICICI Securities research report on Aditya Birla Fashion and Retail

Key takeaways from Aditya Birla Fashion and Retail (ABFRL)’s Q4FY20 results: 1) focus on cost reduction through aligning rental cost in-line with revenues, curtailing discretionary spends by 50-70% and optimise employees/other costs; 2) preserving cash through rationalising capex (by ~60-70%) and optimising working capital; 3) proposing Rs10bn rights issue to de-leverage balance sheet; 4) ABFRL’s >1,300 stores (out of 3,041 stores) have started partial operations as of now.

Outlook

Factoring-in higher demand impact due to Covid-19, we reduce our FY21E and FY22E EBITDA by 29% and 11% respectively, target multiple to 18x (earlier 20x) and target price to Rs130/sh (earlier Rs180/sh) based on 18x FY22E EV/E. Maintain BUY, as concerns around weak H1FY21E seems adequately priced-in.

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