BUY Most well-rounded show in retail Birla Fashion - 3QFY20 - HDFC sec...Aditya Birla Fashion and Retail BUY . Most well-rounded show in retail . ABFRL's revenue grew 12.3% YoY to

HDFC securities Institutional Research is also available on Bloomberg ERH HDF <GO>& Thomson Reuters

RESULTS REVIEW 3QFY20 09 FEB 2020

Aditya Birla Fashion and Retail BUY

Most well-rounded show in retail ABFRL's revenue grew 12.3% YoY to Rs. 25.6bn (3.5% above estimated Rs. 24.76bn) as both anchors - Madura and Pantaloons performed well and beat expectations. Adj. EBITDA margins (Pre-IND-AS) stood at 8.4% (vs est: 7.1%). The beat was a function of 1. GM trickle down effect, 2. Improved profitability in Pantaloons and 2. Reducing losses in the fast fashion biz. The company reported losses for the quarter (Rs. Rs. 334mn) primarily due to a higher tax outgo (courtesy a one-time deferred tax charge of Rs. Rs. 1.43bn) HIGHLIGHTS FOR THE QUARTER Madura puts up a strong show -Lifestyle brands put up a strong shoe, pivots muscle from Wholesale to retail: Lifestyle brands grew by ~14% YoY to Rs 12.95 bn (vs. est. Rs. 12.5bn) driven by Retail SSSG of 15%. The strong show was underpinned by a strong traction in women wear (35% YoY) and Kids wear (21% YoY) and robust online channel growth (+45% YoY). Retail channel (EBOs) grew 30% YoY to Rs. 6.42bn. However, EBITDA margin contracted by 95 bps to 10.7% (vs. est 11.5%) primarily led by 1) higher rent bills courtesy the strategic shift from wholesale to retail (EBO) channel as the former continues to face liquidity issues and 2) Higher franchisee commissions as EBO expansion was franchisee-heavy. The format added 167 net store adds in 3Q (store count: 2,126). -Fast Fashion losses recede, innerwear scaling up nicely: Fast fashion continues to lose relevance in the portfolio as the company has stepped off the growth pedal. People brand’s

migration into Pantaloons is expected to complete by exit-FY20. While revenue de-grew 13% YoY; losses in the quarter (-Rs. 40mn) were a third of that in the base. Other Biz grew strongly at ~40% YoY backed by continued aggression in innerwear. Van Heusen has now penetrated to 20,000 MBOs/distributors (vs Page's 60,000+). Despite the scale up, EBITDA losses remained contained at Rs. 210mn. (vs est. 180mn; vs. 190mn in 3QFY19). Pantaloons shaping up well: Pantaloons grew 12.7% to Rs. 10.83bn (vs est: 10.52bn). SSSG print at 4.9% remained moderately healthy. EBITDA margins surprised positively and improved 90bp to 10.1% (vs est: 9%) despite stable private label mix and moderate SSSG growth. This was primarily due to 1. better assortment planning leading to lower inventory marked downs, ergo higher GMs, 2. Higher full-price sales, 3. Favorable operating leverage. The format added 41 stores YoY taking the store count to 343. STANCE Strong focus on retail and a shift to the 12 season model is likely to help improve assortment freshness – footfall enabler; ergo sustain growth momentum across anchor formats. We continue to prefer strong Brands and value fashion plays and ABFRL is well placed to milk both categories. We revise our DCF-based TP to Rs. 290/sh (earlier Rs. 250). Revision is a function of 1. Revision in our EBITDA estimates (1.5-2%) for FY21/22 respectively and 2. DCF-roll-over to FY22.

Financial Summary (Rs mn) 3QFY20 3QFY19 YoY (%) 2QFY20 QoQ (%) FY18 FY19 FY20E FY21E FY22E Net Revenue 25,625 22,816 12.3 23,078 11.0 71,721 81,177 89,616 103,435 118,942 Adj EBITDA 2,158 1,729 24.8 1,573 37.2 4,683 5,541 6,734 8,393 10,454 APAT (207) 703 NM 212 NM 1,178 3,212 2,405 3,696 3,933 EPS (Rs) (0.43) 0.91 NM (0.03) NM 1.5 4.2 3.1 4.8 5.1 P/E (x) 166.7 61.1 81.6 53.1 49.9 EV/EBITDA (x) 45.7 38.5 31.5 25.0 19.8 Core RoCE(%) 6.1 8.7 10.4 13.1 12.6

Source: Company, HDFC sec Inst Research

INDUSTRY RETAIL CMP (as on 07 Feb 2020) Rs 261 Target Price Rs 290

Nifty 12,098

Sensex 41,142

KEY STOCK DATA

Bloomberg ABFRL IN

No. of Shares (mn) 774

MCap (Rs bn)/(US$ mn) 202/2,826

6m avg traded value (Rs mn) 110

STOCK PERFORMANCE (%)

52 Week high / low Rs 264 / 180

3M 6M 12M

Absolute (%) 28.9 29.1 23.7

Relative (%) 27.7 17.0 12.4

SHAREHOLDING PATTERN (%)

Dec-19 Sep-19

Promoters 59.09 59.09

FIs & Local MFs 21.1 20.79

FPIs 9.36 9.7

Public & Others 10.45 10.42

Pledged shares 0 0 Source : BSE

Jay Gandhi [email protected] +91-22-6171-7320

Rutvi Chokshi [email protected] +91-22-3021-2080

ABFRL: RESULTS REVIEW 3QFY20

Page | 2

Earnings call highlights

Overall picture

Despite the weak consumer sentiments courtesy economic slowdown, ABFRL has reported healthy numbers and growth. 3Q has been one of the best quarters in terms of an all-round performance. Consolidated revenue grew by 12% YoY and EBITDA margins grew by around 70 bps. It moved to a lower tax regime because of which it had to remeasure its deferred tax assets which had a one-time impact of Rs 1.06 bn in 3Q.

ABFRL opened 150 stores in 3Q which is the highest additions made in any quarter.

Capex guidance for FY20 is at Rs 3.5-4b. Net debt at Rs 22.4 bn higher in order to fund ESOP trust share purchases. Targeted debt/EBITDA below 3.5x.

ABFRL has put a 12-season inventory model into action which will help in bringing freshness to the assortment mix and keep the market trend in check. ‘Spring summer 20’ will mark the first full season of the model and benefits to be realized over next 12-18 months.

Lifestyle Brands

Revenues grew by 14% YoY to Rs 12.9 bn positively impacted by the 30%/45% YoY growth in retail/ e-commerce channel of the biz. EBITDA at Rs 1.38 bn. LTL growth at 15% in 3Q.

91 stores added in 3Q.

MBOs are reeling under liquidity issues and ABFRL is trying to support its partner channels.

There has been a significant shift of focus to increasing retail channel reliance and aggressive expansion of stores because of which rent expenses

have shot up. Franchise commissions form a part of rent which have gone up with the increase in sales.

Franchise operations contribute to 75-80% to small format stores whereas 75-80% of Pantaloons stores are funded through own capital.

Lifestyle brand division is working to on building fulfilment capabilities to service e-commerce orders via its EBOs which can become a strong competitive advantage for it with time.

Pantaloons

Revenues grew by 13% YoY to Rs 10.8bn. EBITDA margins at 10.1%. LTL growth at 4.9%. Growth is a result of both good LTL growth and new stores.

12 stores added in 3Q. Management continues to stick to its 55-60 store openings plan for FY20. The company has opened more stores in Tier2/3 cities and plans to focus more on expansion in Tier2/3 cities.

ABFRL is consolidating People into Pantaloons and it is expected to be completed by the end of the year,

Pantaloons is able to introduce fresh inventory every fortnight in its stores courtesy the 12- season inventory model.

Private labels contribute to 61% of revenues for 3Q. Target is to reach to a 70-75% revenue share.

Many new brands and products are being introduced in its private label; ABFRL has launched a kid’s wear brand named “Candy”, added sarees to its Rangmach label and added a home and decor section to its Pantaloons stores.


Page | 3

Fast fashion

Revenues de-grew by 12% YoY to Rs 0.89 bn. EBITDA at Rs -0.04bn in 3Q. Focus is increased to improve operational efficiencies and local sourcing would be given importance to help turn around the biz.

Other Businesses

Revenues grew 39% YoY to Rs 1.48 bn. EBITDA at Rs -0.21 bn in 3Q.

Innerwear at 20,000 outlets in 3Q. Innerwear growth remained to be strong but it forms a small part of the overall business.

Ethnic wear

Revenues at Rs 0.3 bn and EBITDA at Rs -0.1 bn in 3Q.

Jaypore will transition from a purely online to online and offline channel with 8-10 stores by FY21 end.

Shantanu & Nikhil will open its first store in 4QFY20 and open 5-6 stores by FY21 end.


Page | 4

Quarterly Financials Rs. Mn 3QFY20 3QFY19 YoY (%) 2QFY20 QoQ (%) FY20E FY19 YoY (%) Net Revenue 25,625 22,816 12.3 23,078 11.0 89,616 81,177 10.4 Material Expenses 12,301 11,426 7.7 11,474 7.2 43,061 39,250 9.7 Employee Expenses 2,757 2,361 16.8 2,530 9.0 10,438 9,130 14.3 Other Operating Expenses 6,475 7,299 (11.3) 5,682 14.0 29,383 27,257 7.8 EBITDA 4,091 1,729 136.6 3,392 20.6 6,734 5,541 21.5 Depreciation 2,208 680 224.5 2,248 (1.8) 2,577 2,823 (8.7) EBIT 1,883 1,049 79.5 1,144 64.6 4,158 2,717 53.0 Other Income 145 134 8.3 166 (12.6) 691 648 6.7 Interest Cost 1,047 480 118.1 1,057 (1.0) 1,945 1,874 3.8 PBT before exceptional 981 703 39.7 253 287.9 2,904 1,491 94.8 Exceptional - - - - - - - - PBT 981 703 39.7 253 287.9 2,904 1,491 94.8 Tax 1,315 - NM 276 375.7 498 (1,721) NM Share of Associate Earnings - - - - - RPAT (334) 703 NM (24) NM 2,405 3,212 (25.1) APAT (207) 703 NM 212 NM 2,405 3,212 (25.1) EPS (0.4) 0.9 NM 0.0 NM 3.1 4.2 (25.1)

% of Net Revenue 3QFY20 3QFY19 YoY (bps) 2QFY20 QoQ (bps) FY20E FY19 YoY (bps) Material Cost 48.0 50.1 (208) 49.7 (171) 48.1 48.4 (30) Employee Expenses 10.8 10.3 41 11.0 (20) 11.6 11.2 40 Other Expenses 25.3 32.0 (672) 24.6 65 32.8 33.6 (79) EBITDA 16.0 7.6 839 14.7 127 7.5 6.8 69 Tax Rate(% of PBT) 134.0 - NM 109.3 2,471 17.2 (115.4) NM APAT (0.8) 3.1 NM 0.9 NM 2.7 4.0 (127) Source: Company, HDFC sec Inst Research


Page | 5

Story in Charts Revenue and growth (Rs. mn, YoY %) Lifestyle Brands' SSSG at 15%, Pantaloons’ SSSG at

4.9%

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research Adj. EBITDA and margin (Rs. mn, %) Gross margin and Adj. EBITDA margin (%)

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

Net Revenues grew by 12.3% YoY High SSSG of ~15%/5% Lifestyle Brands/ Pantaloons Gross margin grew at 208 bps YoY to 52% whereas Adj EBITDA margins grew at 84 bps YoY to 8.4%. Cost of retailing remains to be constant over the years.

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Page | 6

Madura’s revenue and growth (Rs. mn, YoY %) Madura’s EBITDA margins at 7.3% in 3Q

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research Pantaloons’ revenue and growth (Rs. mn, YoY %)

Pantaloons’ EBITDA margin high at 10% in 3Q


Madura exceeded our expectations showing a revenue growth of 15.3% YoY. Under Madura; Lifestyle Brands (51% of total revenue) grew by ~14% YoY, Fast fashion (3% of total revenue) de-grew 13% YoY and Other Businesses (6% of total revenue) grew ~40% YoY. Pantaloons (~42% of total revenue) grew at ~12.7% YoY which too is very impressive.

0.02.04.06.08.010.012.014.016.018.020.0

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Lifestyle brands added 167/30 stores YoY/QoQ Pantaloons added 41/12 stores YoY/QoQ

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research Lifestyle brands’ retail space at ~2.7 mn. sq. ft. Pantaloons’ retail space at ~4.4 mn. sq. ft.


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Lifestyle brands’ revenue per sq. ft. at Rs. 19,565 Lifestyle brands’ EBITDA per sq. ft. at Rs. 14,614

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research Pantaloons’ revenue per sq. ft. at Rs. 10,373 Pantaloons’ EBITDA per sq. ft. at Rs. 1,044


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Lifestyle brands’ channel-wise revenue mix (%) Lifestyle brands’ revenues loyalty driven

Source: Company, HDFC sec Inst Research Source: Company, HDFC sec Inst Research Pantaloons’ revenue mix (Rs mn) Pantaloons’ category mix (%)


ABFRL is trying to bring in a strategic shift to move to a retail model. Retail channel is contributing more and more over the years to the revenue mix of Lifestyle brands. Wholesale channel is ailing under liquidity issues. Lifestyle brands’ revenues are highly loyalty driven. Private labels continue to contribute to Pantaloons’ revenue on a consistent basis Kids and Men category are seen to be growing relevance in the category mix of Pantaloons.

35 45 38 48

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Wholesale % Retail % Others %

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Men Women's Western Women's Ethnic Kids Non Apps


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Quarterly snapshot (Actual vs HDFC estimates) Rs. Mn 3QFY19 2QFY20 3QFY20 YoY (%) QoQ (%) 3QFY20E Variance (%) Net Revenue 22,816 23,078 25,625 12.3 11.0 24,769 3.5 Total COGS 11,426 11,474 12,301 7.7 7.2 12,385 (0.7) Gross Profit 11,389 11,604 13,323 17.0 14.8 12,385 7.6 Gross Profit Margin (%) 49.9 50.3 52.0 208 bps 171 bps 50.0 199 bps Total Operating expenses 9,660 8,212 9,232 (4.4) 12.4 8,719 5.9 Reported EBITDA 1,729 3,392 4,091 136.6 20.6 3,666 11.6 EBITDA Margin (%) 7.6 14.7 16.0 839 bps 127 bps 14.8 117 bps Adj EBITDA 1,729 1,573 2,158 24.8 37.2 1,747 23.6 Adj EBITDA Margin (%) 7.6 6.8 8.4 84 bps 161 bps 7.1 137 bps Depreciation 680 2,248 2,208 224.5 (1.8) 2,348 (6.0) EBIT 1,049 1,144 1,883 79.5 64.6 1,318 42.9 EBIT Margin (%) 4.6 5.0 7.3 275 bps 239 bps 5.3 203 bps Finance cost 480 1,057 1,047 118.1 (1.0) 1,132 (7.5) Other income 134 166 145 8.3 (12.6) 150 (3) PBT 703 253 981 39.7 287.9 336 192.1 Exceptional Item - - - - Tax Expenses - 276 1,315 NM 375.7 84 1,465.7 Effective Tax Rate (%) - 109.3 134.0 NM 2471 bps 25.0 NM Share of associate earnings - - - EO items - - - - - PAT 703 (23) (334) NM NM 252 NM APAT 703 212 (207) NM NM 252 NM APAT margin (%) 3.1 0.9 (0.8) NM NM 1.0 NM Source: Company, HDFC sec Inst Research


Page | 11

Segmental performance (Actual vs HDFC estimates)

Source: Company, HDFC sec Inst Research ( Note: Operating expenses are comparable are Pre INDAS-116)

3QFY19 2QFY20 3QFY20 YoY (%) QoQ (%) 3QFY20E Variance (%) Revenue (Rs. mn) 22,820 22,970 25,630 12.3 11.6 24,769 3.5 Madura 13,450 14,630 15,320 13.9 4.7 14,752 3.9

Lifestyle brands 11,370 12,540 12,950 13.9 3.3 12,507 3.5 Fast Fashion 1,020 750 890 (12.7) 18.7 867 2.7 Other Biz 1,060 1,340 1,480 39.6 10.4 1,378 7.4

Pantaloons 9,610 9,150 10,830 12.7 18.4 10,523 2.9 Elimination (240) (810) (520) NM NM (505) NM

EBITDA (Rs. mn) 1,860 1,780 2,250 21.0 26.4 2,060 9.2 Madura 1,010 1,370 1,130 11.9 (17.5) 1,198 (5.7)

Lifestyle brands 1,320 1,580 1,380 4.5 (12.7) 1,438 (4.1) Fast Fashion (120) - (40) NM NM (61) NM Other Biz (190) (210) (210) NM NM (179) 17.2

Pantaloons 880 640 1,090 23.9 70.3 947 15.1 Elimination (30) (230) 30 NM NM (86) NM

EBITDA margin (%) Madura 7.5 9.4 7.4 (13 bps) (199 bps) 8.1 (75 bps)

Lifestyle brands 11.6 12.6 10.7 (95 bps) (194 bps) 11.5 (84 bps) Fast Fashion (11.8) - (4.5) NM NM (7.0) NM Other Biz (17.9) (15.7) (14.2) NM NM (13.0) NM

Pantaloons 9.2 7.0 10.1 91 bps 307 bps 9.0 106 bps

EBIT (Rs. mn) 1,183 1,327 1,960 Madura 668 1,044 947 41.9 (9.3) Pantaloons 541 500 998 84.6 99.4 Elimination (25) (217) 15 NM NM Operating Expenses (Rs mn) Employee expenses 2361 2530 2757 16.8 9.0 2650 4.0 Rent expenses 3010 2840 3498 16.2 23.2 3034 15.3 Other expenses 4289 6480 6842 59.6 5.6 6069 12.8


Page | 12

Source: Company, HDFC sec Inst Research Estimate change

(Rs mn) FY20E FY21E FY22E

New Old Change (%) New Old Change (%) New Old Change (%) Revenue 89,616 90,811 (1.3) 103,435 104,178 (0.7) 118,942 119,023 (0.1) Gross Profit 46,555 46,813 (0.6) 53,682 53,599 0.2 61,671 61,117 0.9 Gross Profit Margin (%) 51.9 51.5 40 bps 51.9 51.4 45 bps 51.8 51.3 50 bps EBITDA 6,734 6,745 (0.2) 8,393 8,263 1.6 10,454 10,276 1.7 EBITDA margin (%) 7.5 7.4 9 bps 8.1 7.9 18 bps 8.8 8.6 16 bps APAT 2,405 2,685 (10.4) 3,696 3,746 (1.3) 3,933 4,130 (4.8) APAT margin (%) 2.7 3.0 (27 bps) 3.6 3.6 (2 bps) 3.3 3.5 (16 bps) EPS (Rs) 3.1 3.5 (10.4) 4.8 4.8 (1.3) 5.1 5.3 (4.8) Source: Company, HDFC sec Inst Research

KPIs 3QFY19 2QFY20 3QFY20 YoY (%) QoQ (%) 3QFY20E Variance (%) Store and Area Brand Stores (#) 2369 2544 2,656 12.1 4.4 - MBOs (#) 16000 22000 24,000 50.0 9.1 - SIS in Dept Stores (#) 4326 5403 6,261 44.7 15.9 - Total Retail area (mn sq ft) 7.4 7.9 8 9.5 2.5 - Lifestyle Brands Stores (#) 1,959 2,096 2,126 8.5 1.4 2,126 - Area(mn sq ft) 2.55 2.67 2.74 7.5 2.7 2.70 1.3 Loyalty base (lakhs) 145 170 176 21.4 3.5 - % revenue from loyal customers 57 50 46 (19.3) (8.0) - LTL % 8 7 15 87.5 114.3 - Pantaloons Stores (#) 302 331 343 13.6 3.6 - Area(mn sq ft) 3.95 4.26 4 10.4 2.4 - Loyalty base (lakhs) 137 166 171 24.8 3.0 - LTL % 17.0 10.4 5 (71.2) (52.9) -


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Assumptions

FY16 FY17 FY18 FY19E FY20E FY21E FY22E Revenue (Rs. Mn) Madura F&L 39,789 41,143 44,688 50,315 55,491 63,929 73,182 YoY (%) 6.5 3.4 8.6 12.6 10.3 15.2 14.5 Lifestyle brands 37,340 36,510 38,660 43,040 46,634 52,521 58,911 Fast Fashion 3,440 3,985 3,580 3,274 3,476 3,728 Other Biz 1,180 2,055 3,680 5,583 7,931 10,544 No. of Stores (#) 1,902 1,935 2,042 2,249 2,539 2,829 3,129 Retail Area (mn. Sq. ft) 2.6 2.7 2.6 2.8 3.2 3.6 4.0 Revenue per sq. ft (Lifestyle) (Rs.) 6,329 6,680 6,593 6,817 7,119 7,185 7,286 SSSG (%) 0.4 (5.7) 9.2 5 9 5 5 Expansion-led growth (%) 6.1 5.4 (6.0) 1.8 5.4 7.9 7.0 Pantaloons Revenue 21,565 25,523 28,615 31,940 36,345 42,057 48,672 No. of Stores (#) 163 209 275 308 373 438 508 Retail Area (mn. Sq. ft) 2.9 3.2 3.8 4.0 4.7 5.4 6.1 Revenue per sq. ft (Rs.) 8,294 8,405 8,250 8,211 8,323 8,335 8,502 SSSG (%) 2.7 (1.2) 1.2 1.3 4.9 4.1 5.0 Expansion-led growth (%) 13.5 19.8 10.7 10.2 8.4 11.1 10.2 Total Revenue (Rs. Mn) 60,346 66,330 71,814 81,177 89,616 103,435 118,942 EBITDA (Rs. Mn) Madura F&L 3,651 3,426 3,440 4,020 4,583 5,748 7,246 YoY (%) (21.1) (6.2) 0.4 16.9 14.0 25.4 26.1 Lifestyle brands 3,580 4,220 4,490 5,190 5,549 6,355 7,246 Fast Fashion (505) (535) (320) (115) (52) - Other Biz (335) (535) (850) (851) (555) - Pantaloons 1,009 1,257 1,708 2,310 2,978 3,672 4,547 Total EBITDA 4,398 4,830 5,051 6,190 7,425 9,250 11,581 Gross Profit (Rs. Mn) 32,822 35,942 37,820 41,928 46,555 53,682 61,671 Gross Margin (%) 54.4 54.4 52.7 51.6 51.9 51.9 51.8 EBITDA margin (%) Madura F&L 9.2 8.3 7.7 8.0 8.3 9.0 9.9 YoY (%) Lifestyle brands 9.6 11.6 11.6 12.1 11.9 12.1 12.3 Fast Fashion (14.7) (13.4) (8.9) (3.5) (1.5) - Other Biz (28.4) (26.0) (23.1) (15.3) (7.0) - Pantaloons 4.7 4.9 6.0 7.2 8.2 8.7 9.3 Total EBITDA 7.3 7.3 7.0 7.6 8.3 8.9 9.7 Source: Company, HDFC sec Inst Research


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Income Statement Year End March (Rs mn) FY18 FY19 FY20E FY21E FY22E Net Revenues 71,721 81,177 89,616 103,435 118,942 Growth (%) 8.6 13.2 10.4 15.4 15.0 Material Expenses 33,901 39,250 43,061 49,753 57,271 Employee Expense 7,723 9,130 10,438 11,944 13,616 Rent Expense 10,429 11,104 12,168 13,941 15,912 Advertisement Expense 3,380 4,415 4,874 5,522 6,350 Other Expenses 11,605 11,738 12,341 13,882 15,339 EBITDA 4,683 5,541 6,734 8,393 10,454 EBITDA Growth (%) 7.0 18.3 21.5 24.6 24.6 EBITDA Margin (%) 6.5 6.8 7.5 8.1 8.8 Depreciation 2,805 2,823 2,577 2,887 4,424 EBIT 1,878 2,717 4,158 5,507 6,030 Other Income (Including EO Items) 328 648 691 857 1,127

Interest 1,716 1,874 1,945 1,901 1,901 PBT 490 1,491 2,904 4,462 5,256 Total Tax (688) (1,721) 498 766 1,323 RPAT 1,178 3,212 2,405 3,696 3,933 Exceptional Gain/(loss) - - - - - Adjusted PAT 1,178 3,212 2,405 3,696 3,933 APAT Growth (%) 120.2 172.7 (25.1) 53.7 6.4 Adjusted EPS (Rs) 1.5 4.2 3.1 4.8 5.1 EPS Growth (%) 120.2 172.7 (25.1) 53.7 6.4


Balance Sheet Year End March (Rs mn) FY18 FY19 FY20E FY21E FY22E SOURCES OF FUNDS Share Capital - Equity 7,717 7,735 7,735 7,735 7,735 Reserves 3,214 6,554 8,959 12,656 16,589 Total Shareholders Funds 10,931 14,289 16,694 20,391 24,324 Preference Share Capital 0 - - - - Long Term Debt 11,879 7,238 7,238 7,238 7,238 Short Term Debt 6,735 9,791 9,791 9,791 9,791 Total Debt 18,614 17,029 17,029 17,029 17,029 Net Deferred Taxes (688) (2,634) (2,634) (2,634) (2,634) Other Non-current Liabilities & Provns 1,607 1,737 1,737 1,737 1,737

TOTAL SOURCES OF FUNDS 30,464 30,420 32,826 36,522 40,455 APPLICATION OF FUNDS Net Block 7,227 6,959 7,965 8,949 8,812 CWIP 459 224 224 224 224 Other Non-current Assets 19,875 19,917 19,917 19,917 19,917 Total Non-current Assets 27,561 27,100 28,106 29,090 28,953 Inventories 16,912 19,213 21,456 24,594 28,086 Debtors 5,518 7,866 8,929 10,164 11,525 Other Current Assets 5,889 8,782 9,695 11,190 12,868 Cash & Equivalents 770 616 1,489 3,589 6,953 Total Current Assets 29,089 36,477 41,569 49,538 59,432 Creditors 20,093 23,986 26,725 30,421 34,493 Other Current Liabilities & Provns 6,093 9,170 10,124 11,685 13,437 Total Current Liabilities 26,186 33,157 36,849 42,106 47,930 Net Current Assets 2,903 3,321 4,720 7,432 11,502 TOTAL APPLICATION OF FUNDS 30,464 30,420 32,826 36,522 40,455



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Cash Flow Statement Year End March (Rs mn) FY18 FY19 FY20E FY21E FY22E Reported PBT 490 149 2,904 4,462 5,256 Non-operating & EO Items 237 1,590 (691) (857) (1,127) Interest Expenses 1,669 1,846 1,945 1,901 1,901 Depreciation 2,805 2,823 2,577 2,887 4,424 Working Capital Change 760 (937) (527) (612) (706) Tax Paid (10) (196) (498) (766) (1,323) OPERATING CASH FLOW ( a ) 5,951 5,276 5,709 7,016 8,425 Capex (3,271) (2,792) (3,583) (3,871) (4,287) Free Cash Flow (FCF) 2,680 2,484 2,126 3,145 4,138 Investments (36) 22 - - - Non-operating Income 55 4 691 857 1,127 INVESTING CASH FLOW ( b ) (3,252) (2,766) (2,892) (3,014) (3,160) Debt Issuance/(Repaid) (2,481) (2,674) (1,945) (1,901) (1,901) FCFE 199 (189) 182 1,244 2,237 Share Capital Issuance 12 9 - - - Dividend - - - - - Others - - - - - FINANCING CASH FLOW ( c ) (2,469) (2,664) (1,945) (1,901) (1,901) NET CASH FLOW (a+b+c) 230 (154) 873 2,101 3,364 EO Items, Others - - - - - Closing Cash & Equivalents 726 572 1,447 3,547 6,911


Key Ratios FY18 FY19 FY20E FY21E FY22E PROFITABILITY (%) GPM 52.7 51.6 51.9 51.9 51.8 EBITDA Margin 6.5 6.8 7.5 8.1 8.8 EBIT Margin 2.6 3.3 4.6 5.3 5.1 APAT Margin 1.6 4.0 2.7 3.6 3.3 RoE 11.5 25.5 15.5 19.9 17.6 RoIC (or Core RoCE) 6.1 8.7 10.4 13.1 12.6 RoCE 9.2 15.8 11.7 14.1 13.0 EFFICIENCY 3.94 Tax Rate (%) - - 17.2 17.2 25.2 Fixed Asset Turnover (x) 6.6 6.5 5.6 5.2 4.9 Inventory (days) 86 86 87 87 86 Debtors (days) 28 35 36 36 35 Other Current Assets (days) 30 39 39 39 39 Payables (days) 102 108 109 107 106 Other Current Liab & Provns (days) 31 41 41 41 41 Cash Conversion Cycle (days) 11 12 13 14 14 Net Debt (Rs mn) 17,844 16,412 15,540 13,439 10,075 Net D/E (x) 1.6 1.1 0.9 0.7 0.4 Interest Coverage (x) 1.1 1.4 2.1 2.9 3.2 PER SHARE DATA (Rs) EPS 1.5 4.2 3.1 4.8 5.1 CEPS 5.2 7.8 6.4 8.5 10.8 Dividend - 1.0 2.0 3.0 4.0 Book Value 14.2 18.5 21.6 26.4 31.4 VALUATION P/E (x) 166.7 61.1 81.6 53.1 49.9 P/BV (x) 18.0 13.8 11.8 9.7 8.1 EV/EBITDA (x) 45.7 38.5 31.5 25.0 19.8 EV/Revenues (x) 3.0 2.6 2.4 2.0 1.7 OCF/EV (%) 2.8 2.5 2.7 3.3 4.1 FCF/EV (%) 1.3 1.2 1.0 1.5 2.0 FCFE/Mkt Cap (%) 0.1 (0.1) 0.1 0.6 1.1 Dividend Yield (%) - 0.4 0.8 1.2 1.6



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RECOMMENDATION HISTORY

Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target 9-Dec-19 225 BUY 250 12-Jan-20 233 NEU 250 9-Feb-20 261 BUY 290

150

170

190

210

230

250

270

290

Feb-

19

Mar

-19

Apr-

19

May

-19

Jun-

19

Jul-1

9

Aug-

19

Sep-

19

Oct

-19

Nov

-19

Dec -

19

Jan-

20

Feb-

20

ABFRL TP

HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel,Mumbai - 400 013 Board : +91-22-6171 7330 www.hdfcsec.com


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BUY Most well-rounded show in retail Birla Fashion - 3QFY20 - HDFC sec...Aditya Birla Fashion and Retail BUY . Most well-rounded show in retail . ABFRL's revenue grew 12.3% YoY to

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