Target: ₹280

CMP: ₹258.40

Aditya Birla Fashion & Retail (ABFRL’s) ‘investor day’ highlighted focus on profitable organic growth with no further acquisitions and need for capital raise.

New entity Aditya Birla Lifestyle Brands Ltd (ABLBL) is expected to deliver about 11 per cent CAGR over FY24-30, along-with 300 bps EBITDA gain enabled by better margin in the core business, shut-down of loss-making Forever-21, and healthy gains in Innerwear, Reebok, AE.

The remnant ABFRL business is expected to deliver a high-teen revenue CAGR and strong EBITDA turnaround from loss-making operations to 7 per cent by FY30. ABLBL is a self-sustaining business with a strong return profile of over 70 per cent, while remnant ABFRL will require investments in Style-Up, Tasva, Galeries Lafayette, and TCNS.

However, the recent fund-raise of ₹4,240 crore will leave ₹700 crore debt with ABLBL and ₹1,300 crore cash with remnant ABFRL which should suffice for the segment’s capital requirements. We strongly believe that execution along guided lines offers re-rating potential, but we will keep a look-out for sustained improvement trends before turning constructive. We maintain Add with TP of ₹280.

Published on April 4, 2025

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