Aditya Birla Fashion Share: Is your shopping cart ready? Trent, Aditya Birla Fashion can give a 30-50% return

Recovery in the second half of 4QFY22 compensates for the impact of the Omicron Covid wave. While the business was hit for 35-40 days in 4QFY22, a rapid recovery was observed in the second half of the quarter.

Sales in January 2022 and mid-February 2022 were influenced by the beginning of the Omicron Covid wave. However, there was a strong recovery in the second half of 4QFY22 amid improved steps and easing of constraints.

While a stable recovery was observed in May, revenue dynamics in March 2022 remained negative to low compared to March 2020 / March 2021.

Companies with a presence in the cities serving the business community and small businesses have felt some impact from low purchasing power and economic challenges.

This is evident from the poor performance of VMART, with a decline in sales in the same store. Retailers such as Shopper Stop, Lifestyle, West Life Developers in the Clothing category, who care about the relatively high ASP categories, saw better performance as a liking.

Despite continued pressure from higher raw material prices (Yarns) on clothing retailers, the gross / EBITDA margin improved on an annual basis in the fourth quarter as companies raised prices by 5-10% in various categories, for to pass on the increase in investment.

Overall net profit improved as the strong revenue recovery in the last part of 4QFY22 allowed for a reduction in fixed costs.

The impact of the Omicron Covid wave is expected to be short-lived, as most retailers reported strong growth and recovery in demand in March 2022. The momentum of in-store additions continued despite a slight slowdown in early 4QFY22.

Additions to DMART stores remained strong, with 21 additions to the store, reaching 284 stores as of March 22. Similarly, WLDL / Zudio added a net of 3/56 stores in 4QFY22, reaching 200/233 stores.

While the sector is witnessing a recovery on a monthly basis, supported by improved results, continued rising commodity prices and inflationary pressures may affect demand in the future.

Here are two investment ideas for the next 12 months. The increase calculated on the basis of the LTP of 17 June:

Aditya Birla Fashion: Buy | LTP Rs 230 | Target Rs 350 | 52% increase

Aditya Birla Fashion’s strong ability to perform is reflected in its ability to expand a series of strong brands over the past 10 years with healthy growth.

Ethnic Wear, turning EBITDA into positive, along with continued momentum in other businesses, including Innerwear, remains the key positive.

With a healthy recovery and growth momentum in the verticals, we are modeling strong revenue / EBITDA CAGR of 30% / 40% in FY22-24E.

The recent announcement of a preferential issue of 22 billion rupees for

it must further reduce its leverage position by Rs 5 billion and stimulate growth in a wide range of new categories.

Trent: Buy LTP 1043 rupees Target 1430 rupees 37% increase

Trent’s successful store performance, healthy store economy and aggressive growth strategy offer a huge growth path for the next three to five years, as the company aims for 25% annual revenue growth.

Emerging categories such as beauty and personal care, interior design and home continued to gain popularity among customers. We expect 37% revenue growth in the 22-24 financial year, which guarantees a first-class valuation of shares.

(The author is the head – Retail Research, Limited)

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