Why Bernstein Just Rated Aditya Birla Lifestyle as a ‘Buy’: Key Insights for Investors

Bernstein recently began coverage of Aditya Birla Lifestyle Ltd. with a target price of Rs 170 and a ‘Market-Perform’ rating. This company has separated from Aditya Birla Fashion and Retail Ltd. and started trading independently on June 23.

The firm stands out for its strong brands like Louis Philippe, Van Heusen, Allen Solly, and Peter England, which have shaped the western formal wear scene in India for the last twenty years. Bernstein points out that these legacy brands have solid recognition and profitability.

However, the report raises concerns about future growth. It notes the existing high market saturation, the rising trend toward casual wear, and stiff competition could limit long-term success. In fact, lifestyle brands have struggled historically, showing less than 6% compound annual growth over the past decade. That’s lower than the country’s GDP growth.

Bernstein’s analysis suggests that future growth might mainly come from replacing older items, given the already high demand for formalwear. While casual and wedding wear segments are expanding, they are also fiercely competitive. The firm expressed uncertainty about whether branding or product enhancements could lead to significant growth in the near term.

Additionally, categories like sportswear, athleisure, and innerwear are growing faster than traditional apparel. Bernstein notes that ABLBL’s brands, while popular, are still smaller compared to their rivals and are working to establish a strong market presence. The company’s past growth of around 20% primarily resulted from expanding its brand portfolio.

Going forward, Bernstein projects ABLBL will see about 9.5% growth over the next five years (FY25-FY30), with an expected earnings before interest, tax, depreciation, and amortisation (EBITDA) growth of 10%. The firm indicates that consistent double-digit growth could shift market perceptions of the stock positively, presenting a key risk or upside opportunity.

As the fashion industry evolves, understanding trends can help investors gauge where growth might appear. For example, according to recent research from Statista, the athleisure market is expected to reach $257.1 billion by 2024, highlighting the strong consumer shift towards comfortable, versatile clothing options.

You can read more about this evolving landscape in reports from trusted sources like IBEF.

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Aditya Birla Lifestyle Brands Ltd