Stay 'Neutral' On Aditya Birla Fashion Shares Maintains Motilal Oswal — Check Target Price 

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Motilal Oswal Report

Aditya Birla Fashion and Retail Ltd. provides a diversified play across several high-growth segments in apparel retail, such as ethnic wear, D2C online-first brands, and luxury retail. However, over the last few years, Aditya Birla Fashion’s profitability and valuations have been hurt by investments in several businesses, which are currently in the build-out/ turnaround phase and are loss-making.

After the recent fund raise, debt-related concerns have been addressed, and management has indicated that focus would be on turning around the existing formats, rather than acquisitions.

Growth recovery in Pantaloons and profitable scale-up of value fashion and branded ethnic wear, along with a turnaround in TMRW, remain key mediumterm monitorables.

We raise our FY26-27E revenue by 5-8%, driven by higher growth in TMRW (potential consolidation of Wrogn), luxury retail, and OWND!. Our FY26/27E Ebitda increases 12%/26%, driven by margin improvement in Pantaloons and Luxury Retail. However, we expect Aditya Birla Fashion to remain in losses over FY25-28, due to the drag from TMRW.

We value Aditya Birla Fashion on an SOTP basis. We assign an EV/Ebitda multiple of 11x/12.5x to Pantaloons (inc. OWND!) and a designer-led ethnic portfolio.

We ascribe EV/sales multiples of 0.9x/0.75x/1.5x to Aditya Birla Fashion’s premium ethnic/ TMRW/Luxury Retail portfolio to arrive at our target price of Rs 100.

Aditya Birla Fashion’s valuations at ~1.5x FY27E EV/sales and ~14.3x FY27E reported EV/Ebitda optically look undemanding. However, we note that attributable sales for Aditya Birla Fashion are slightly lower, as the company does not own a 100% stake in several brands. Further, we expect Aditya Birla Fashion to remain in operating losses, when adjusted for rentals, until FY27 at the least.

We reiterate our Neutral rating on Aditya Birla Fashion as we await improvement in execution towards consistent growth and sustained profitability before we turn more constructive on the stock.

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