ABFRL posted one other robust quarter pushed primarily by traction in Lifestyle Brands, which benefitted from a powerful marriage ceremony season, wardrobe refresh and model extensions taking part in out. The key spotlight although is Rs 22 bn of fairness funding by GIC. ABFRL plans to deploy it to speed up funding in core enterprise (lacking since Covid) and strengthen the steadiness sheet. Details on allocation are awaited; Pantaloons would get the most important share and, on the again on this, is focusing on FY23e capex of Rs 7 bn, its highest ever.
We are tweaking down FY23e Ebitda by 2% to consider larger advertising spends. This together with a rollover to Sep-23e yields a revised TP of Rs 354 (21x EV/Ebitda; earlier Rs 347). Maintain ‘Buy’.
Outperformance throughout the board
ABFRL reported a 22% y-o-y soar in income to Rs 21.8 bn (120% of Q4FY20). By section, Lifestyle Brands grew 34% y-o-y whereas Ebitda surged 77%, on the again of revival of wholesale enterprise and retail LTL of 13% y-o-y. Pantaloons was up 13% y-o-y, with restoration at 108% of Q4FY20. Ethnic enterprise has touched an annual run fee of Rs 4 bn and broke even at Ebitda degree. Gross margin improved ~100bp y-o-y regardless of RM inflation as ABFRL has taken worth hikes to mitigate the impression.
Net debt stood at Rs 5 bn (Q3FY22 – destructive internet debt) and ABFRL noticed stock build-up for the approaching season together with new enterprise necessities. Management guided for larger gross sales & advertising spends in FY23, and is focusing on FY23e capex of Rs 7 bn.
GIC funding of Rs 22 bn to fund long-term enlargement
ABFRL authorized elevating of as much as Rs 22 bn from GIC, Singapore’s sovereign wealth fund, after which it could personal ~7.5% fairness stake. Accordingly, ABFRL is an accelerated funding in enterprise, which in accordance with the corporate has not occurred since Covid struck, and strengthening the steadiness sheet. While actual particulars are awaited, Pantaloons would get the most important share of funding.
Outlook and valuation: Baking in larger spends; preserve ‘BUY’
We are tweaking down FY23e Ebitda by 2% to consider larger advertising spends by the agency. This together with a rollover to Sep-23 yields a revised TP of Rs 354 (21x EV/Ebitda, Rs 347 earlier). Maintain ‘Buy’ ranking.
Source: www.financialexpress.com”