Aditya Birla Fashion & Retail Ltd (ABFRL) (erstwhile Pantaloons Fashion & Retail) is India’s leading fashion lifestyle entity. It includes endearing brands and retail businesses of Madura Fashion & Lifestyle (Madura) and Pantaloons, respectively. ABFRL has the largest retail footprint of 5.4 million square feet. Further, it owns a network of over 2,100 exclusive brand stores.
Valuation and View
With strong growth in Madura and Pantaloons, we expect overall revenue to increase to Rs. 8,697 crore in FY18E. Further, margins are expected to accentuate to 7.6% in FY18E driven by the synergy benefits coupled with capital efficiencies arising from the consolidation. We expect ROE to improve to 16.5% in FY18E; ROCE is projected to increase to 12.6% in FY18E. We initiate coverage on the stock with a BUY rating with a target price of Rs. 165 (based on DCF), assuming cost of equity of 13.5% and terminal growth rate of 5%, implies a potential upside of ~20% over the next 1 year.
Research Report Aditya Birla Fashion & Retail Ltd
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