8 November 2020
2QFY21 Results Update | Sector: Retail
Aditya Birla Fashion and Retail
Estimate changes
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
ABFRL IN
772
127.3 / 1.7
281 / 96
10/8/-27
305
CMP: INR153
TP: INR200 (+31% )
Buy
Aggressive cost rationalization, deleveraging efforts
to reap rewards
Financials & Valuations (INR b)
FY20 FY21E FY22E
Y/E March
Sales
87.4
54.5
78.9
EBITDA
12.3
3.3
11.0
Adj. PAT
-0.1
-6.0
-1.3
EBITDA Margin (%)
14.0
6.0
14.0
Adj. EPS (INR)
-0.2
-3.9
-0.7
EPS Gr. (%)
NM
NM
NM
BV/Sh. (INR)
14.0
8.0
7.4
Ratios
Net D:E
4.4
3.3
2.6
RoE (%)
NM
NM
NM
RoCE (%)
NM
NM
3.2
Payout (%)
0.0
0.0
0.0
Valuations
P/E (x)
NM
NM
NM
EV/EBITDA (x)
13.7
83.8
27.7
EV/Sales (x)
1.9
5.0
3.9
Div. Yield (%)
0.0
0.0
0.0
FCF Yield (%)
1.2
0.5
2.3
Shareholding pattern (%)
As On
Sep-20 Jun-20
Promoter
59.8
59.1
DII
22.3
22.7
FII
6.6
7.0
Others
11.3
11.3
FII Includes depository receipts
Aditya Birla Fashion and Retail (ABFRL)’s revenues were down 56% YoY (in-
line) due to lockdown. However, sharp cost rationalization, with a 45%
reduction in operational cost, cushioned EBITDA loss to INR17m (v/s EBITDA
profit of INR3.5b in 2QFY20).
We cut our revenue estimates by 13%/4% and EBITDA estimates by 38%/7%
for FY21E/FY22E due to sluggish recovery in the Apparel category, factoring
in FY22E revenue/EBITDA 10% below FY20 levels. Nevertheless, strong
deleveraging and earnings recovery from 2HFY21 would provide a double
advantage. Maintain Buy.
ABFRL’s 2QFY21 revenue fell 56% YoY to INR10.1b (in-line).
Revenue/EBITDA for the Lifestyle segment was down 58%/82% YoY to
INR5.3b/INR390m. Revenue/EBITDA for Pantaloons was down 60%/51%
YoY to INR3.7b/INR710m. Other businesses’ revenue was down 16%, but
EBITDA grew 13% to INR1.8b/INR260m.
Gross margins reduced 300bp YoY to 47%, with gross profits at INR4.8b (in-
line). SG&A/employee cost fell 45%/32% YoY and rent expenses also fell
36% YoY (12% below est.), leading to lower expenses. Strong cost reduction
led to better-than-estimated EBITDA loss to INR17m (v/s EBITDA profit of
INR3.5b YoY in 2QFY20; est. loss of INR1.2b).
Net loss thus came in at INR1.8b, supported by higher other income and tax
reversals (est. net loss of INR3.3b).
Net debt stood at INR31.6b, excluding the Flipkart deal amount of INR15b
and INR5b (i.e., 50%) of rights issue.
Revenue decline in the Lifestyle segment was accentuated by sharp 88%
decline in the Wholesale business from large formats. Own Retail biz sales
fell 42% YoY. Other categories, including Innerwear has already achieved
pre-COVID sales.
Expect 3QFY21 to garner 70–80% of last year’s sales, while in 4QFY21, sales
should normalize to pre-COVID levels.
It aims to bring debt to INR20–25b by FY21 from INR31.6b in 1HFY21,
(excluding the Flipkart investment) through a reduction in payables by
INR5b, an additional rights issue of INR2.5b, and earnings.
Online business revenues grew 3x YoY. Pantaloons online sales grew 4.3x
YoY. The Lifestyle segment should achieve online sales contribution of 12–
13%, and Pantaloons should increase to 4–5% over next 12-18 months.
It aims to add 100 new stores per year for the Lifestyle segment and around
25 stores for the Pantaloons brand, with capex of INR1.5b.
Revenue declines 56%; sharp cost measures support loss
Sep-19
59.1
20.8
9.7
10.4
Highlights from management commentary
Research Analyst: Aliasgar Shakir
(Aliasgar.Shakir@motilaloswal.com)
Suhel Shaikh
(Suhel.Ahmad@MotilalOswal.com) |
Anshul Aggarwal
(Anshul.Aggarwal@motilaloswal.com)
3 September
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P
1
Motilal Oswal
2019
Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.