Meet Update Analyst – Aditya Birla Fashion and Retail – ICICI Direct
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At the recently held ABFRL Virtual Analyst Meeting, the company embarked on a five-year strategic growth plan with a focus on generating healthy FCFs in all business formats ( Cumulative FCF worth ~ Rs. 1000 crore in FY22-26E) and a RoCE of ~ 25% per FY26E. ABFRL has developed growth strategies to become an entity of approximately 2.8 billion US dollars (Rs. 21,000 crore) by fiscal year 26E, resulting in a CAGR of 15% in fiscal year 20-26E. It is betting big on ethnic gambling (through the latest acquisitions) with the category expected to grow at a rapid rate (from Rs. 50 crore in FY20 to Rs. 2000 crore by FY26E). The indoor clothing segment, in a short period of time, saw a significant increase with revenues reaching Rs. 280 crore in FY20 (launched in FY17). Management expects Homewear revenue to maintain healthy momentum through increased touchpoints and post a 32% CAGR in fiscal year 20-26E, with a target of break even by fiscal 23E.
Assessment and outlook
We believe that the focus on generating higher RoCE across all business formats, coupled with sales growth primarily driven by internal accruals, bodes well for ABFRL. It reduced its debt from Rs. 3,181 crore in Q2FY21 to Rs. 580 crore (through the release of working capital, rights issues and cash injection by Flipkart). Controlled working capital cycle, recovery of profitability and regular FCF generation would lead to a drop in the debt / EBITDA ratio to 0.6x by FY23E (6.0x in FY20). We continue to love ABFRL in the apparel business due to strong brand positioning capturing various price points with strong brand recall. We are maintaining BUY with a revised TP of Rs. 225 (old TP: Rs. 210).
For more details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ABFRL_AnlstMtUpdate_Mar21.pdf
Shares of Aditya Birla Fashion and Retail Ltd were last trading in BSE at Rs.192.7 from the previous close of Rs. 183.75. The total number of shares traded during the day was 650,568 in more than 6,531 transactions.
The share hit an intraday high of Rs. 196.85 and an intraday low of 182.6. The net turnover during the day was Rs. 124,816,028.
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