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Cash flow discipline key for further re-rating; maintain ADD

We maintain ADD on ABFRL, with an unchanged TP of Rs100 (implied 20x Sep27E EBITDA – Exhibit 1). ABFRL’s Q2 EBITDA was impacted by a ~100bps miss on the EBITDA margin, while revenue growth of 13% was in line with expectations. The weaker EBITDA margin (down 30bps YoY) was led by higher investments in Pantaloons/TMRW, though partially offset by the better-margin performance of the Ethnic segment. The usage of balance-sheet cash (standalone) was higher at ~Rs6bn in H1; ABFRL attributed this to seasonality and expects it to normalize by the year-end. Pantaloons’ LTL growth picked up at 7% in Q2, although the format is expected to see additional marketing investments and store refurbishments in the near term. Albeit on a low base, the value format OWND and ethnic-wear brands like Tasva/Sabyasachi saw healthy 40-60% growth, along with healthy expansion plans. While ABFRL offers faster growth prospects, key triggers for the stock are growth revival in Pantaloons, multifold scale-up of Tasva/Style-up/TCNS, and working capital optimization across the Ethnic portfolio.