Neutral Aditya Birla Lifestyle Brands; target of Rs 80: Motilal Oswal

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • ABLBL's revenue growth was driven by 27% YoY growth in Emerging Brands, with a 6.7% EBITDA margin, and 9% YoY growth in Lifestyle Brands, with a 19.5% EBITDA margin.
  • The company's operating leverage, supported by employee and rental cost control, led to a 14% YoY EBITDA growth and 35bp YoY margin expansion.
  • Management reiterated its target of 11-12% revenue growth CAGR with consistent margin expansion over the medium term, driven by 7-8% LTL growth and retail network expansion.
  • The company's store expansion plans, with over 100 gross stores added in 2Q, and a strong e-commerce growth, are expected to support revenue growth and margin expansion.

Thesis Validation Checklist

  • Consistent double-digit revenue growth, along with improved profitability in Emerging Brands, remains the key catalyst for a potential re-rating.
  • Investors should watch for signs of sustained growth momentum, improvement in operating leverage, and progress in store expansion and e-commerce growth.
  • The company's ability to maintain its margin expansion trajectory, despite input cost inflation, will be crucial.
  • ABLBL's debt reduction plans, with a target of INR6b net debt by FY27-end, and its ability to generate strong cash flows, will be important to monitor.