ICICI Direct's research report on Aditya Birla Fashion and Retail
ABFRL has a strong presence in the menswear segment (formal and casual wear). However, ABFRL does not have a foothold in the Indian Ethnic wear segment which is growing in mid-teens. To strengthen its presence in the Ethnic wear segment ABFRL in last one month has done acquisition of two brands namely ‘Jaypore’ and ‘Shantanu and Nikhil’.
Outlook
We continue to like ABFRL due to its strong brand portfolio of lifestyle brands and improving profitability metrics for Pantaloons. The ethnic wear acquisition would provide ABFRL an existing ecosystem (designing team, supply chain, dealer network, etc) in an underpenetrated category, which can be scaled up. Since the contribution to overall revenues (~1%) is not material as of now, we do not incorporate the same in our estimates. We pencil in a revenue and EBITDA CAGR of 13% and 23%, respectively, for FY19-21E. We have a BUY rating on the stock with a target price of | 240 (1.9x FY21E EV/sales).
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