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Initial signs of demand recovery

Our channel checks suggest apparel brands/retail companies are likely to see >80% pre-covid revenue recovery during Q2FY22 with easing of various lockdownrelated restrictions. Aug-Sep’21 likely witnessed improved footfalls / revenue recovery owing to EoSS, declining covid cases and healthy pace of vaccination. Online channel continues to see growth both QoQ and YoY, while MBO channel bookings have likely resumed ahead of festive / wedding season.

As highlighted in our recent note Margins to surprise as demand bounces back, we expect consensus to turn more constructive with management commentary on Q2FY22 result. TRENT, VMART and ABFRL remain our preferred picks. Key risks: Lower discretionary spending and increasing online competition.

* TRENT’s standalone revenue may grow 79% YoY on a low base to Rs8.1bn, implying >90% revenue recovery compared to Q2FY20 also aided by healthy stores additions across both Westside and Zudio. The company added 9 Zudio stores during Q2FY22 taking total store count to 142 stores. TRENT may report post-IndAS 116 EBITDA margin of ~13.5% and PAT of Rs137mn.

* ABFRL’s consolidated revenue likely to grow 87% YoY on a low base to Rs19bn, implying >80% revenue recovery compared to Q2FY20 also aided by stores additions across various formats and acquisitions. Overall, the company may report post-IndAS 116 EBITDA margin of ~10.5% and PAT loss of Rs705mn.

* VMART’s revenue may grow 79% YoY on a low base to Rs3.1bn, implying >90% revenue recovery compared to Q2FY20 also aided by stores additions and onemonth consolidation of the recently acquired Unlimited. On an organic basis, the company added net 12 stores in Q2FY22, taking the total to 368 stores including 74 stores of Unlimited. It may report EBITDA (post-IndAS 116) of Rs58mn impacted by EBITDA losses at Unlimited and may report PAT loss of Rs270mn.

* TCNSBR’s revenue may grow 77% YoY on a low base to Rs2.55bn, implying >80% revenue recovery compared to Q2FY20 also aided by store additions. The company may report post-IndAS 116 EBITDA margin of ~10% and breakeven at PAT level.

* SHOP’s revenue may double YoY on a low base to Rs5.75bn, implying >70% revenue recovery compared to Q2FY20. The company may report post-IndAS 116 EBITDA margin of ~11% and PAT loss of Rs335mn.

* ARVINDFA may report revenue of Rs6.5bn, implying >85% revenue recovery for continuing brands compared to Q2FY20. The company may report post-IndAS 116 EBITDA margin of ~3.6% and PAT loss of Rs331mn.

* KEKC’s revenue may grow 122% YoY to Rs1.5bn, implying >90% revenue recovery aided by higher MBO billings. The company may report EBITDA margin of 24% and PAT of Rs272mn.

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