aditya birla fashion retail ltd - edelweiss birla fashion retail ltd ... aditya birla fashion ...

Download Aditya Birla Fashion  Retail Ltd - Edelweiss  Birla Fashion  Retail Ltd ... Aditya Birla Fashion  Retail Ltd. Aditya Birla Fashion  Retail ... Revenue breakup between Madura and Pantaloon

Post on 17-Apr-2018

216 views

Category:

Documents

3 download

Embed Size (px)

TRANSCRIPT

  • Aditya Birla Fashion & Retail Ltd

    Indias Premier Fashion House

    August, 2016

    Kshitij Kaji

    Research Analyst

    +91 (22) 4272 2515

    kshitij.kaji@edelweissfin.com

  • 1 Edel Invest Research

    - Indias Premier Fashion House CMP: 165 Target Price: 215

    Edel Invest Research BUY

    Coverage Stocks: Aditya Birla Fashion & Retail Ltd.

    Aditya Birla Fashion & Retail (ABFRL)formed by merger of Madura and Pantaloons Fashion & Retail (Pantaloons)is Indias largest branded apparels player with a turnover of INR 6,060 crore in FY16. Ability to surpass industry growth anchored by a large base, anticipated margin improvement from Pantaloons turnaround, an asset light model, presence across all categories & price points in apparel and a massive unparalleled distribution network reinforce our optimism in the companys robust growth prospects. Moreover, it is best poised, underpinned by sheer quality & size of Madura's 4 brands and presence in fastest growing segments such as fast fashion through Pantaloons & Forever 21, amongst branded apparel players to take advantage of the improving macroeconomic milieu. Improving financial metricsrobust free cash flow generation, 39% EBITDA CAGR over FY16-18E and 20% RoCE by FY19E (4% currently)are expected to sustain for many years, rendering the company a potential multi-bagger. We initiate with BUY with a TP of INR 215. Presence across value pyramid, diversified market channels, pan-India presence burnish prospects

    Madura is predominantly a premium mens wear player, housing Indias largest brands (Louis Philippe, Van Heusen, Allen Solly and Peter England) with 2.3 mn sq ft retail space and revenue of ~INR 4,000 crore in FY16. Acquisition of retail franchisees such as Pantaloons and Forever 21 gives it access to mid-premium fast fashion for women across additional 2.5 mn sq ft. Cumulatively, Madura and Pantaloons boast of a portfolio of 40 brands, retailed through 2,150 EBOs and additional 7,000 points of sale across India with a combined 5.4 mn sq ft area. We perceive wide offerings across price points (mass to luxury), broad categories (mens wear, womens wear, kids wear, accessories) and diversified market channels (MBOs, EBOs, LRS) to be key catalysts of ABFRLs success.

    Pantaloons long-term game changer; expansion in white spaces, deeper penetration to spur Madura

    Pantaloons aggressive expansion plans are bound to spur ABFRLs top line as new stores in cities sans branded apparel presence provide humungous growth opportunity. Also, targeting the currently fragmented womens wear segment and the fast growing fast fashion segment entails significant long-term benefits. Moreover, higher sales throughput in each store along with improved designs, new vendor network, refurbished IT systems and addition & rationalization of own brands should meaningfully spur its margins. Successful franchisee model in conjunction with economies of scale will aid superior return ratios. Madura is anticipated to far outstrip industry growth underpinned by expansion in white spaces, product extensions through its wide distribution network.

    Improving macros, rising brand consciousness entail humungous growth opportunity

    Domestic branded apparel segment is set to catapult manifold riding: 1) shift from fabrics to readymade garments;

    2) favourable demographics; 3) higher discretionary spends; 4) low GDP per capita spend on apparel; 5) increasing

    spends on branded products due to growing fashion consciousness & aspirations, among others. Sales of branded

    apparels are estimated to grow at 15-20% CAGR over FY16-19E, driven by volumes as well as superior realizations.

    Therefore, the share of branded garments is expected to rise to 48-50% in FY19E compared to ~35% in FY14.

    Outlook and valuations: Burnished prospects; initiate with BUY

    We believe ABFRL is best placed among branded apparel peers to reap significant benefits of the improving macroeconomic milieu due to the sheer quality & size of Madura's 4 brands, presence in fastest growing segments such as fast fashion and an unparalleled distribution network. The companys pole position, ability to generate free cash flow, 39% EBITDA CAGR over FY16-18E and RoCE expansion from 4% currently to 20% by FY19E will yield target multiple of 3x sales for Madura and 15x EV/EBITDA for Pantaloons, leading to a target price of INR 215.

    *Numbers up to FY15 are standalone Pantaloons numbers. Numbers post FY16 are Madura + Pantaloons

    **As there is no Annual Report of ABFRL, all the numbers are based on proforma Financial Statements

    Year to March (INR Cr) FY14 FY15 FY16 FY17E FY18E

    Net revenues 1,661 1,851 6,060 6,911 8,069

    Rev growth (%) 29% 11% NA 14% 17%

    EBITDA margin (%) 2.8 4.7 6.6 8.8 9.5

    Adjusted PAT (187) (228) (104) 179 319

    Adj. EPS (INR) (4) (5) (1) 2 4

    EPS growth (%) NA NA NA NA 78%

    P/E (x) NA NA NA 71.0 40.0

    P/B (x) 13.2 22.2 13.5 11.4 8.8

    RoACE (%) NA NA 3 13 18

    RoAE (%) NA NA NA 17 25

    EV/EBITDA (x) 193 102.5 36.6 23.9 19.0

    Kshitij Kaji Research Analyst +91 (22) 4272 2515 kshitij.kaji@edelweissfin.com

    Bloomberg: ABFRL:IN

    52-week range (INR): 263 / 123

    Share in issue (Cr): 77.2

    M cap (INR Cr): 12,674

    Avg. Daily Vol. BSE/NSE :(000): 300/800

    SHARE HOLDING PATTERN (%)

    (in %) Jun-16

    Promoter 59.46

    Public 40.54

    Others

    Date: 22nd

    August 2016

    40

    60

    80

    100

    120

    140

    160

    180

    200

    220

    Jan

    -15

    Mar

    -15

    May

    -15

    Jul-

    15

    Sep

    -15

    No

    v-1

    5

    Jan

    -16

    Mar

    -16

    May

    -16

    Jul-

    16

    ABFRL Sensex

  • Aditya Birla Fashion & Retail Ltd

    2 Edel Invest Research

    ABFRL: Sales Growth + Margin Improvement + Improving Return Ratios

    ABFRL is best poised, underpinned by sheer quality & size of Madura's 4 brands and presence in fastestgrowing segments such as fast fashion through Pantaloons & Forever 21, amongst branded apparelplayers to take advantage of the improving macroeconomic milieu. Improving financial metricsrobustfree cash flow generation, 39% EBITDA CAGR over FY16-18E and 20% RoCE by FY19E (4% currently)are expected to sustain for many years, rendering the company a potential multi-bagger

    Wide offerings across price points (mass to luxury), broad

    categories (mens wear, womens wear, kids wear, accessories) and diversified

    market channels (MBOs, EBOs, LRS) to be key catalysts of

    ABFRLs success.

    Pantaloons aggressive expansion plans in cities sans

    branded apparel presence, targeting the currently

    fragmented womens wear segment and the fast growing fast fashion segment entails

    significant long-term benefits.

    Improving macros, rising brand consciousness entail humungous growth

    opportunity. The share of branded garments is expected

    to rise to 48-50% in FY19E compared to ~35% in FY14.

    FY16 FY17E FY18E FY19E

    Revenue 6060 6911 8069 9483

    EBITDA 397 608 767 948

    EBITDA Margin

    7% 9% 10% 10%

    PAT -104 179 319 476

    FY16 FY17E FY18E FY19E

    RoACE (%) 3% 13% 18% 21%

    Debt to Equity (x)

    2.0 1.7 1.2 0.8

    Multiple Price Target

    Madura 3x Market Cap to Sales215

    Pantaloons 13x EV/EBITDA

    Entry = INR 165

    EBITDA CAGR of 39% to lead to blended exit multiple of 24x

    FY18E EV/EBITDA

    Total Return of

    32%

  • Aditya Birla Fashion & Retail Ltd

    3 Edel Invest Research

    Focus Charts

    ABFRL Portfolio mix FY16 Presence across all segments

    Expected size of ABFRL brands by FY20E ABFRL has a massive retail presence

    *2011 and 2012 is only Madura. 2013 onwards includes Pantaloons

    Expect robust topline growth alongwith margin increase Return ratios to improve

    Source: Company, Edel Invest Research

    39%

    32%

    12%

    8%

    5% 4%

    Men's Casuals

    Men's Formals

    Women's Western wear

    Women's Ethnic wear

    Kids

    Accessories

    4500

    1000 500

    150 50 50 0

    1000

    2000

    3000

    4000

    5000

    Pan

    talo

    on

    s

    Lou

    is P

    hili

    pp

    e

    Pet

    er E

    ngl

    and

    Van

    Heu

    sen

    Alle

    n S

    olly

    Fore

    ver

    21

    Peo

    ple

    The

    Co

    llect

    ive

    Hac

    kett

    Sim

    on

    Car

    ter

    Size (INR Cr) - FY20E

    1500-2000 cr each

    895 1129 1367 1648 1865 2200

    1.3 1.6

    3.6

    4.2 4.8

    5.5

    0

    1

    2

    3

    4

    5

    6

    0

    500

    1000

    1500

    2000

    2500

    FY11 FY12 FY13 FY14 FY15 FY16

    EBOS (LFS) Carpet Area (mn Sq ft) (RHS)

    6060 6911 8069 9483

    6.6%

    8.8%

    9.5%

    10.0%

    5.0%

    6.0%

    7.0%

    8.0%

    9.0%

Recommended

View more >