Multibagger Stock Recommendation Aditya Birla Fashion & Retail (ABFRL)

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Pee Vee
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Multibagger Stock Recommendation Aditya Birla Fashion & Retail (ABFRL)

Post by Pee Vee »

Buy Aditya Birla Fashion & Retail Ltd

Largest pure play branded fashion retailer

Aditya Birla Fashion & Retail (ABFRL) is the largest branded fashion house in India formed by the merger of Madura Fashion and Lifestyle (MFL) - branded apparel business, with Pantaloons Fashion and Retail (PFL) - value fashion retailer - which created a complete branded retail pure play. Its presence across all categories and price points, scope of margin improvement on the back of better operational and financial performance of the merged entity, strong brand portfolio and wide distribution reach reinforces ABFRL’s growth prospects in future.

Ø Theme: 1) Restructuring of the business to offer better synergies; 2) Brand ownership + strong retail network = Unique business model. 3) Market Interest for such business model leading to re-rating of the stock.

Ø Stock recommendation based on Technical: ABFRL is trading above its resistance of 160 and has also completed a closing above resistance level. Oscillator and momentum indicators are in buy mode as well and are suggesting further rise. Buying is recommended at current levels and on dips towards 160 for a target of 205 and a stop loss of 152 for 4 months.

Ø Restructuring of the business to offer better synergies: In FY16, MFL (a subsidiary of AB Nuvo) was merged with PFL (acquired from Future group in FY13) to form ABFRL. The merger could be highly synergetic in terms of operational and financial efficiency. The merger has created huge economies of scale which could lead to rationalization of operational cost in terms of inventory sourcing and reduced overheads thus attaining better operational efficiencies. Further, strong free cash flow generation of the merged entity will help deleveraging of balance sheet creating better value for shareholders. .

Ø Brand ownership + strong retail network = unique business model: ABFRL has the advantage of both brand ownership of MFL and strong retail presence of PFL. MFL has a strong brand portfolio in menswear (Louis Philippe, Van Heusen, Allen Solly and Peter England) along with recently acquired Forever 21 (F21) for womenswear under its umbrella. PFL is one of the largest value fashion retailers in India. ABFRL’s brand portfolio has offering across segments and price points with one of the widest distribution networks in the industry spanning across ~5.5mil sq. feet of area with ~2,200 Exclusive Brand Outlets/stores. Merger plugs gaps in brand portfolio and distribution network to form a unique business model having huge economies of scale. A strong market interest is such unique business model could lead to re-rating of the stock.

Ø Demonetization blues and shift in festive season impacted Q3FY17: ABFRL for Q3FY17 reported a revenue growth of 4.7% YoY to Rs1,700 crore. EBITDA declined by 8.8% to Rs87 crore with corresponding EBITDA margin at 5.1%. This was mainly impacted by demonetization, integration cost of F21 & innerwear business and shift of festive season in east (Puja in month of Sep vs. Oct in Q3FY16) where Pantaloons has a strong presence. However, the growth strategy still remains intact and the business performance should bounce back strongly supported by F21 and recently launched innerwear segment.

Ø Risk factors: 1) Slower than expected ramp-up of Pantaloons stores; 2) Deep discounting from E-commerce is a threat; 3) Delay in the implementation of GST.

Centrum Research
Ahir
Posts: 3
Joined: Sat Apr 22, 2017 8:52 pm

Re: Multibagger Stock Recommendation Aditya Birla Fashion & Retail (ABFRL)

Post by Ahir »

Also ADITYABIRLAMONEY SHARE is a good byte.
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