Buy Aditya Birla Fashion and Retail; target of Rs 240: ICICI Direct

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ICICI Direct's research report on Aditya Birla Fashion and Retail

ABFRL reported a weak operational performance with numbers coming in below our estimates. A significant increase in advertisement spend and muted revenue growth in Pantaloons division impacted the overall performance. Revenues grew 9% YoY to Rs 1915.3 crore mainly driven by steady growth in lifestyle brands. Higher employee expenses (up 36% YoY to Rs 235 crore) coupled with aggressive marketing spends (~Rs 54 crore higher spend) and one time inventory markdown worth Rs 10 crore, restricted EBITDA growth. EBITDA margins for the quarter fell 280 bps YoY to 6.5%.

Outlook

We believe the growth story remains intact with Q4FY19 being an exception. We reiterate our BUY rating on the stock with a revised target price of Rs 240 (FY21E 1.9x EV/sales).

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