After a massive 30 percent fall in the stock in just 3 months, domestic brokerage house Dolat Capital is expecting an over 50 percent upside in Aditya Birla Fashion and Retail (ABFRL). The brokerage has a ‘buy’ call on the stock with a target price of ₹385, implying a potential upside of 54 percent.
The stock has fallen over 30 percent from its 52-week high of ₹359, hit in November 2022. It touched it 52-week low of ₹221 in June 2022.
"ABFRL is a healthy and diversified portfolio mix of leading brands in Lifestyle, fashion retailing (Pantaloons and Style-Up), innerwear (Van Heusen), youth western wear, super-premium brands and ethnic luxury fashion. MFL is steady growth and FCF engine, while others can provide strong growth and margin kicker. Recent acquisition of Reebok, House of Masaba and entry into D2C platforms business shall further augment the growth momentum," noted the brokerage.
It also pointed out that the management has highlighted that it may overshoot its growth aspirations outlined in ‘Vision 2026’ and may come up with revised guidance.
However, with a number of businesses under the growth/incubation stage and a significant step-up in investments to support this business, earnings continue to remain volatile, cautioned the brokerage.
The company reported a 94.3 percent decline in its consolidated net profit at ₹11.21 crore for the third quarter ended December 31, 2022 on account of an increase in marketing and strategic investments in new ventures. It had posted a net profit of ₹196.80 crore during the October-December quarter of the previous fiscal.
Its revenue from operations was up 20.14 percent to ₹3,588.80 crore during the quarter under review as against ₹2,987.10 crore in the year-ago period.
"Net profits for the quarter were impacted by 2.3 times increase in marketing and strategic investments in new ventures," ABFRL said in its earning statement. Its total expenses were at ₹3,602.84 in the third quarter of FY23, up 31.28 percent.
ABFRL said the long-term outlook for the company continues to be positive owing to the normalisation of offline businesses, the proliferation of e-commerce, and the continued penetration of organised and branded apparel.
"With multiple growth drivers at play, ABFRL is strategically positioned to capitalise, having firmly established its presence across multiple categories, segments, channels and price points," it said.
The company, which has a repertoire of leading brands such as Louis Philippe, Van Heusen, Allen Solly and Peter England besides fast fashion store Pantaloons, has a network of 3,442 stores across approximately 32,589 multi-brand outlets as of December 31, 2022.
Its international brands portfolio includes The Collective, India's largest multi-brand retailer of international brands and has long-term exclusive partnerships with select brands such as Ralph Lauren, Hackett London, Ted Baker, Fred Perry, Forever 21, American Eagle and Reebok.
The stock has fallen 13 percent in the last 1 year. It has been in the red for 4 straight months since November 2022, down 29 percent in this period. It is down less than half a percent for February so far but had shed 11 percent in January, 8.5 percent in December and 11 percent in November.
21 analysts polled by MintGenie on an average have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.