Business Insight:

With the share of organised retail growing at a non-linear pace in India, brands with strong vintage/brand equity should benefit from the Indian consumer migrating from ‘unbranded’ to branded apparel.

Further, with increasing disposable income we would continue to witness greater traction of ‘up trading’ by the consumer at every price point.

ABFRL is rightly placed to capitalise on the overall lucrative growth opportunity in India’s branded apparel space. It has been one of the few companies in India which has overcome the intricate balance of growth, profitability & capital efficiency.

ABFRL has bridged all possible price and aspiration point gaps in its portfolio by tying up with western brands (Forever 21, Ralph Lauren etc) and also acquiring ethnic brands (Shantanu & Nikhil, Jaypore) in addition to its legacy Pantaloons acquisition

ABFRL is focusing on:

a) reducing End of Season sales share and improving own private labels share (in Pantaloons) to expand gross margins

b) product refreshes every month vs two collections annually earlier

c) growth in adjacencies like shoes, bags and innerwear.

Valuation and View:

• Pantaloons’ turnaround and Madura’s steady growth/profitability improvement should drive around 20% EBITDA CAGR over FY19-22.

• PBT would grow ~4x led by reducing debt over FY19-22.

• The current market price implies 21x FY21 EV/EBITDA which should gradually converge towards its nearest competitor, Trent’s multiple of 35x EV/EBITDA, leaving a meaningful upside for investors.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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