Aditya Birla Fashion May Have Missed Q3 Expectations But Analysts Are Still Bullish — Here's Why

Analysts at HDFC Securities and Anand Rathi Research noted that the company's dampened Q3 numbers were a result of higher ad spending and newer business investments.

The Aditya Birla Fashion Analysts: Analysts at HDFC Securities upgraded the stock's rating to ‘buy' from ‘add' with a target price of ₹300.

Vaishnavi Mandhaniya for Anand Rathi Research maintained the ‘buy' rating for the stock with a price target of ₹360 – an over 30% upside from the current market price of around ₹250. 

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The Aditya Birla Fashion Thesis: The Analysts were impressed by the performance of Madura Lifestyles. HDFC Securities noted that the company's 25% year-over-year growth in revenue from operations at ₹3,588 crore was largely driven by revenue growth at Madura. Analysts at Anand Rathi also noted that "Madura Lifestyle brands' resilient performance continued" which posted an 18% YoY growth in revenue.

However, in their research note, HDFC Securities said that the company's profits were disappointing. The company's net profits sunk over 90% to ₹11.2 crore in the December quarter. Both analysts attributed the loss to an increase in ad and marketing spendings and investments into new businesses.

Anand Rathi Research expects yearly ad spends to continue at around 3.5-4% of sales. The analyst, however, said that Madura brands continued to do well across categories, and the management remains hopeful that the brand’s profitable growth will continue.

Price Action: Shares of Aditya Birla Fashion and Retail were down 0.32% at ₹247.20 to continue its three-session losing streak.

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Posted In: clothing retailersFashion RetailerHDFC SecuritieslifestyleQ3FY23