Bernstein analyst Jignanshu Gor maintained a Sell rating on Aditya Birla Fashion and Retail Limited (ABFRL – Research Report) today and set a price target of INR270.00.
Jignanshu Gor’s rating is based on several factors affecting Aditya Birla Fashion and Retail Limited’s (ABFRL) prospects. The company recently completed a Qualified Institutional Placement, raising significant cash, which could potentially drive growth. However, ABFRL’s core lifestyle business faces structural challenges, including high market penetration and the casualization trend, making sustained growth difficult. The demerger into two entities presents a mixed outlook where one part shows low growth but high profitability, while the other has mid-level growth and margins.
Despite the positive cash position post-demerger and the company’s efforts to improve profitability by closing underperforming stores, there are concerns about the long-term growth potential. Key segments like Pantaloons and Ethnic wear are at peak profitability but face structural and competitive challenges that may constrain future expansion. The valuation of the company’s shares, trading at a premium, suggests limited upside unless there is substantial evidence of improved growth rates, which currently seems uncertain. Thus, Gor maintains a cautious stance, preferring to wait for more tangible results before revising the outlook.