Aditya Birla Fashion shares down 12% in two days after Q1 loss misses estimates

"The selling started on Friday and today we are seeing follow-through. The stock, last time when it was hitting lows, made a weekly closing bottom of around Rs 190. So I have been penciling a target of Rs 190. We are now close to that. But if it starts breaking below that, there is a good chance that the stock will decline further and head towards levels of around Rs 170-172. So I think there is 10 percent more downside over here, avoid the stock, don’t try to buy it on declines," said technical analyst Mitessh Thakkar.

Out of the 25 analysts tracking the stock, 11 maintain a 'buy', nine recommend a 'hold', and five suggest a 'sell', according to data from Bloomberg. The consensus price estimate suggests a 17 percent upside over the next one year.

ABFRL's Q1 EBITDA was 8-12 percent short of expectations, primarily on account of weaker margin in Pantaloons/Innerwear. "We believe the overall weakness in the value-segment (Pantaloons) and the wedding/athleisure-related slowdown in the premium-end (Madura/Ethnic) drove a low 5-6% organic growth in Q1, while Reebok/D2C consolidation led to the balance 5-6% growth," brokerage Emkay said.

"Positives were return of wholesale growth or margin in Lifestyle and profitable outlook for Reebok, while negatives were persistent weakness in Pantaloons and delayed breakeven for Innerwear," the brokerage noted.

The management's curtailed store-adds outlook was maintained for Pantaloons, while Reebok or Tasva are expected to see another year of healthy additions.

Net debt is expected to double in FY24 to Rs 2,800 crore, led by weak margin in FY24, Rs 700 crore capex, rise in WC and loss-funding in Ethnic/D2C.

ABFRL posted a consolidated net loss of Rs 161.62 crore for the first quarter ended June 30 of the current fiscal 2023-24, as against a profit of Rs 94.44 crore in the same period of the previous fiscal.

The quarterly profits were affected by negative operating leverage, resulting from subdued sales for the Pantaloons business, as well as continued investments in TMRW and ethnic businesses.

The company's total revenue from operations has increased 11 percent YoY to Rs 3,196.06 crore in the quarter under review as compared to Rs 2,874.76 crore in the same quarter last year.

The growth in quarterly revenue was driven by a strong pick-up in new businesses and consistent performance from established businesses, despite challenging market conditions.

Operating profit, calculated as EBITDA, tumbled 37.6 percent to Rs 292.3 crore as against Rs 468.5 crore in the year-ago period. Margins came in at 9.1 percent versus 16.3 percent on-year.