ABLBL

: Attractive Entry Point Amid Long-Term Growth Visibility

Aditya Birla Lifestyle Brands Limited (

) reported muted overall growth in Q2FY26 despite double-digit like-to-like (LTL) retail store sales. Consolidation of its retail network and GST transition issues in wholesale weighed on performance. With consolidation largely complete, new store additions, stabilising online operations, and margin expansion from higher productivity and emerging businesses are expected to drive stronger growth from Q3FY26. The company aims to become debt-free within 2–3 years, supported by healthy cash flows and limited capex needs. Operating revenue growth was limited to low single digits, with UCP retail contributing ~85% of revenues. Store count rose modestly to 3,256 from 3,230 in Q1FY26. Wholesale channel sales were muted due to GST rate changes in September 2025. Management expects overall revenue growth to reflect strong LTL momentum from Q3FY26. Wholesale sales should recover post-GST transition, while online business stabilisation—through rationalised discounts—will aid growth. Store expansion is set to accelerate, reinforcing double-digit growth. EBITDA margins fell to 16% in H1FY26, but productivity gains and operating leverage from emerging businesses are expected to lift margins. Lifestyle remains the core driver, while innerwear (Van Heusen), sportswear (Reebok), and youth fashion (American Eagle) are targeted to grow 18–20% annually. ABLBL aims for EBITDA margins >18% by FY30. Debt-to-equity rose to 1.0x in September 2025 from 0.75x in March 2025, driven by festive inventory build-up. With growth recovery and inventory normalization, debt levels are expected to decline. Minimal capex requirements support the goal of becoming debt-free in 2–3 years. Since listing in June 2025, the stock has corrected ~30%. At ₹120 CMP, ABLBL trades at 45x FY28e P/E. With growth visibility, margin expansion, and deleveraging, the current level offers an attractive entry point. Recommendation: Add.