Aditya Birla Fashion brings together Madura Fashion and Pantaloons Retail. It is the custodian of several icons, including the top fashion brands of India – Louis Philippe, Van Heusen, Allen Solly, Peter England and other high end brands. India’s largest big box fashion retailer, Pantaloons is one of the fastest growing lifestyle apparel retail destinations in India

On the strong profit growth, we raise our EBITDA margin Estimate by 1% to 8.30% FY20E. The company’s revenue grew 8.7% YoY, to Rs 1910 crore, in line with our estimate.

Segment-wise, Pantaloons’ revenue growth was ~11% & Madura Lifestyle brands ~6%. PAT came at Rs 5.6 crore versus a Rs 20.3 crore net loss YoY.

Ahead, management will focus on margin expansion and SSG levers in Pantaloons. To achieve this, Pantaloons will focus on –
Strengthening its private-label mix by improving its price-value proposition
Network expansion – adding 40-50 stores a year
Improving brand influence by increasing advertisement spends

Improving in-store (and online) shopper experience.

After achieving ~Rs 100 crore turnover in the first full year of operation, management expects its innerwear division to grow 2x in FY19 to

Rs 200 crore, driven by its foray into women’s innerwear and rapid expansion in the number of points of sales.

We reiterate our buy rating on the stock, with a revised target price of Rs 237 based on 19x FY21e EV/EBITDA.

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