Buy Aditya Birla Lifestyle Brands; target of Rs 95: Anand Rathi

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Resilient performance: Aditya Birla Lifestyle Brands (ABLBL) reported an 11.2% YoY revenue growth in Q2FY27, driven by 5.3% retail LTL growth and 36bps YoY expansion in EBITDA margin to 15.9%.
  • Channel mix and retail network expansion: The company added 72 net stores in Q2FY27, expanding its presence to 3,434 stores, and targets to accelerate store expansion pace with lower closures in H2FY27.
  • Working capital and cash flow management: ABLBL's net working capital fell to 59 days in H1FY27 from 67 days in H1FY26, and the management targets to reduce net debt to Rs6bn by the end of FY27.
  • Price hike and cost inflation: The company implemented a 6% price hike to offset cost inflation, with the full benefit expected to reflect in Q3FY27.

Thesis Validation Checklist

  • Revenue growth: Watch for continued double-digit topline growth, driven by steady state retail LTL growth and accelerated store expansion.
  • Margin expansion: Monitor EBITDA margin expansion, driven by improved operating leverage and lower rent expenses.
  • Store expansion: Track the company's store expansion pace and its impact on revenue growth.
  • Debt reduction: Follow the company's progress in reducing net debt to Rs6bn by the end of FY27. Key risks include higher competition, slower consumption, and slower turnaround in Emerging brands segment.