Aditya Birla Fashion Q1 Review: What Brokerages Had To Say About Widening Losses

Though brokerages remain mixed about Aditya Birla Fashion and Retail Ltd. turning profitable, few analysts raised the target price on the stock, expecting a significant improvement in revenue and Ebitda in the second half of fiscal 2025.

Aditya Birla Fashion and Retail Ltd. saw a wider loss in the first quarter of financial year 2025, even as income met estimates, amid a subdued consumption environment exacerbated by prolonged heatwave and a weak wedding season.

The company reported a consolidated net loss of Rs 215 crore in the April-June quarter, compared to a loss of Rs 162 crore over the same period last year, according to an exchange filing on Wednesday. Analysts' estimates tracked by Bloomberg projected the loss at Rs 214 crore.

With no sign of demand trend improving bundled with high operating and financial leverage, Citi believes the impact its growth and profitability will be highest. The brokerage maintains a 'Sell' with a target price of Rs 260 per share.

• Revenue up 7.2% to Rs 3,428 crore versus Rs 3,196 crore (Bloomberg estimate: Rs 3,546 crore).

• Ebitda up 23% to Rs 359 crore versus Rs 292 crore (Bloomberg estimate: Rs 319 crore).

• Margin at 10.5% versus 9.1% (Bloomberg estimate: 9%).

• Net loss of Rs 215 crore versus loss of Rs 162 crore (Bloomberg estimate: Loss of Rs 214 crore).

Anand Rathi, while maintaining a 'hold' and a target price of Rs 345 apiece, noted an improvement in Ebitda margins while highlighting concerns about profitability and rising debt. Nuvama is more optimistic and raises the target price to Rs 383 apiece, citing the positive impact of the Madura and lifestyle brand demerger.

Axis Securities also raised the target price on the stock to Rs 310 apiece, acknowledging short-term challenges but emphasising the long-term potential of the company’s strategy. Motilal Oswal reiterates a 'neutral' stance with a target of Rs 340, pointing to risks in the premium segment and challenges in scaling new businesses.

Meanwhile, Kotak Institutional Equities retains a 'sell' but raises the target price to Rs 245, expecting a significant revenue uptick only in the latter half of fiscal 2025 while questioning the stock's recent performance.

• Maintains 'sell' rating with target price raised to Rs 260 apiece.

• margin expansion was led by lower discounting, better cost control, and rationalization of less profitable stores.

• Expect nearly 25 store additions under Pantaloons.

• Expect double-digit revenue CAGR for Lifestyle brands over the next five years.

• Maintains 'hold' with a target price of Rs 345 apiece, implying an upside of 8.92% from previous close.

• Madura Lifestyle and Pantaloons reporting 51 basis point and 468 basis point year-on-year higher Ebitda margins

• Overall profitability seems some time away

• Raises target EV/Ebitda multiple by 10%

• Keen competition may hinder revenue growth.

• Slower turnaround for the newer initiatives, rising debt are key risks 

• Maintains a 'sell' with a target price of Rs 260 apiece, implying a downside of 17.91 from previous close.

• Better margin drives first quarter beat; debt increase not so exciting

• Debt rises from Rs 640 crore to Rs 3500 crore in Q1, pointing to sub-optimum profitability currently

• Overall apparel demand remains tepid.

• The value and mature but cash-rich Aditya Birla Lifestyle Brands Ltd. business at implied multiple of 22 times June 2026 Ebitda estimate, while the remnant Aditya Birla Fashion is valued at 1.0 times sales due to lower profitability as of now

• Maintains 'buy' with target price raised to Rs 383 apiece from earlier Rs 343 apiece, implies an upside of 20.91% from previous close.

• Viewing the demerger of Madura and lifestyle brands from the company as positive

• Valuing Madura and Pantaloons segment at 16 time and 10 times, respectively, of first-quarter 2027 EV/Ebitda estimate. The other businesses – given their nascent stage – at EV/sales multiple of 3-time Q1 fiscal 2027.

• Maintains 'hold' with target price raised to Rs 310 apiece from earlier Rs 275 apiece, implies a downside of 2.13% from the previous close.

• Sluggish consumption demand in the discretionary space

• Short-term headwinds persist, but long-term prospects remain positive.

• Management’s renewed strategy to focus on profitability is a step in the right direction.

• The past strategy of revamping product strategy through new launches and acquisitions, renewing brand positioning, and undertaking a digital transformation to increase online sales contributions (including next-generation digital-first brands under its technology-led ‘House of D2C Brands’ venture TMRW) should drive long-term growth. However, these initiatives will take time to yield results.

• The demand environment remains challenging, and meaningful recovery is likely only in second-half of fiscal 2025

• Reiterates 'neutral' with a target price of Rs 340 apiece, implying an upside of 7.34% from previous day's close.

• Persistent softness in discretionary demand could remain an overhang. Further, the premium segment is likely to remain under pressure, which may hurt earnings.

• In the last few years, ABFRL has invested in multiple new businesses, with a long tail of businesses that are presently loss-making or yet to stabilize.

• Scaling up the ethnic wear and Reebok and turning around the newly set up D2C segment could be a bumpy ride. The inclusion of TCNS in this portfolio may further accentuate near-term profitability risks.

• Broadly maintains our revenue/Ebitda estimates for fiscal 2025 and 2026, factoring in a compound annual growth rate of 13% and 21%, respectively.

• Retains 'sell' rating with target price raised to Rs 245 apiece from Rs 230 apiece earlier, implying a downside of 22.65% from previous close.

• We retain the estimates expecting that revenue/Ebitda run-rate would increase significantly in second-half of fiscal 2025, especially in Madura, Ethnic (Tasva, designer brand) portfolios.

• Company-level profitability for now remains elusive. The recent stock price performance lacks fundamental drivers, in their view.