The Hype of Aditya Birla Fashion & Retail Ltd!
It was around 2 year back in 2018 we heard about a Multibagger which can become next Page Industries.. People were madly buying this stock called ABFL.
Let us learn few things from the Hype & Bust!
What was attractive in ABFL in 2018?
Aditya Birla Fashion Limited is Old Pantaloon Retail renamed. It has several good brands retail chain including Van Heusen, Allen Solly etc. They hype was about opening of 2000 new stores & that pushed the stock prices up very high level.. The prices were pushed high like PE at 100 & Book Value Ratio above 20!!
Unfortunately, the stock price did not went up till now – The issues were visible without Corona also. Corona added more trouble on top of it.
What we can learn from the Chaos?
Not all glitters are Gold!
A company with good brand can have Pathetic Balance Sheet.. You should look into the Financials to see whether a stock is good or bad & then start loving it.
The company is having Huge Debts – the Debt/Equity Ratio is 4.45 which is very high for a Retail Brand. (Page Industries have less than 0.2)
The company have alarming Interest Coverage Ratio of 1! (In theory it should be > 2 – otherwise it will have difficulty paying back the loans)
The Sales Growth of the company is just 10% in 2019 which shows poor growth in opening new retail stores.
The Net Profit margin is only 4% during the best times of 2019. A clean growth multibagger should have it above 10% at-least. (Otherwise it has to show high marketing re-investing expenses showing spike in sales growth)
The Intrinsic Value is screwed up at -ve. Same with PEG ratio as well.
So such a mediocre company claiming very high valuations of PE 100 & BV 20X is not the Quality of a Good Multibagger!
History of Aditya Birla Fashion
Aditya Birla Fashion is a part of Aditya Birla Group with sales of 8000 crore spanning retail space of 8 million sq.ft. , it is India’s first billion-dollar pure-play fashion powerhouse providing an elegant bouquet of leading fashion brands and retail formats including Van Heusen, Allen Solly etc
Pantaloon Retail (ABFL) emerged after the consolidation of the branded apparel businesses of Aditya Birla Group comprising Madura Fashion division & Pantaloons Fashion and Retail in the year 2015.
Reference https://www.adityabirla.com/businesses/companies/aditya-birla-fashion-and-retail-limited
Summary
ABFL as of today 2020 June also not attractive in valuations. However if you are holding stocks you can re-evaluate, ensure growth & hold or invest more based on your conviction. We wish good luck for the company to gain its sheen back after the corona times.
Investor should keep in mind Money is what you give, Value is what you get.
Ensure you are getting More Value than you Paid!
Intrinsic Value Calculator
Use our Intrinsic Value Calculator to perform the Validation.
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