- 23 May 2023
- ICICIdirect Research
ABFRL REPORTS DISMAL SET OF NUMBERS WITH MULTI-YEAR LOW EBITDA MARGINS
ABFRL - 277 Change: 0.25 (0.09 %)News: Revenue grew 26% YoY to Rs 2879.7 crore (partly aided by favourable base and foray into new segments). Growth trajectory for Lifestyle brands (Allen Solly, Van Heusen, Louis Philippe and Peter England) moderated with growth of 14% YoY to Rs 1535 crore. Gross margins remained flattish YoY at 55.7%. However, owing to negative operating leverage and initial operating losses in TMRW and new ethnic businesses, EBITDA margins contacted significantly by 960 bps YoY slipping to single digit of 6.7% (I-direct estimate: 9.0%). Absolute EBITDA declined 48% YoY to Rs 192.8 crore. Net losses bloated materially to Rs 194 crore in Q4FY23 (I-direct estimate: -Rs 116 core) vs. net profit of Rs 31.9 crore.
Views: The significant decline in EBITDA margin is disappointing. The company is spending on scaling up the new business (ethnic wear, innerwear and D2C brands), which have lower profitability thereby impacting overall EBITDA margins. The company’s net debt has increased from Rs 504 crore in FY22 to Rs 1422 crore in FY23. Further, the acquisition of TCNS would partially be funded through debt which would increase the debt and entail further pressure on profitability in the near to medium term.
Impact: Negative