Hold Arvind Fashions, target price Rs 270: ICICI Direct

ICICI Securities has hold call on Arvind Fashions with a target price of Rs 270. The current market price of Arvind Fashions Ltd. is Rs 258.7. Time period given by analyst is one year when Arvind Fashions Ltd. price can reach defined target.

Arvind Fashions Ltd., incorporated in the year 2016, is a Small Cap company (having a market cap of Rs 2972.80 Crore) operating in Apparels sector.

Financials
For the quarter ended 30-06-2021, the company reported a Consolidated Total Income of Rs 340.43 Crore, down -57.13 % from last quarter Total Income of Rs 794.18 Crore and up 100.15 % from last year same quarter Total Income of Rs 170.09 Crore. Company reported net profit after tax of Rs -182.49 Crore in latest quarter.

Investment Rationale
The brokerage expects gross debt to reduce from Rs 903 crore in FY21 to Rs 500 crore by FY23E. The management’s focus on prudent capital allocation, stringent working capital policy is expected to translate to positive FCF by FY23E, with pre Ind-AS 116 EBITDA margin of ~7%. Better capital allocation towards profitable brands with improvement in margin profile, debt reduction would be key monitorables. It values AFL at Rs 270, i.e. 8.5x FY23E EV/EBITDA (~20x FY23E EV/EBITDA pre Ind-AS 116).