Buy Future Retail; target of Rs 549: Prabhudas Lilladher
Prabhudas Lilladher is bullish on Future Retail has recommended buy rating on the stock with a target price of Rs 549 in its research report dated October 06, 2017.
Prabhudas Lilladher's research report on Future Retail
FRL continues to lead the industry consolidation in retail with acquisition of ‘HyperCity Retail’ for an EV of Rs9.11bn. HyperCity will add 19 stores and an area of 1.24mn sq. ft, sales of Rs10.8bn, well‐maintained stores and over 20mn footfalls from premium customers. The acquisition has a debt of Rs2.56bn, immediate cash payment of Rs1.55bn and no upside clause in 9.31mn shares allotted, unlike earlier acquisitions of ‘Bharti Retail’ and ‘Heritage Fresh’.
OutlookWe estimate 37% PAT CAGR over FY17‐20 assuming marginal tax rate in FY20. We will revise our estimates on getting more clarity on integration and completion of the acquisition process. The stock trades at 32.8xDec19 EPS. We value the stock at 32xFY20 and arrive at 18 months’ target price of Rs549 ( up from Rs484 valuing at 30xDec19 EPS earlier), given expected gains from acquiring strong franchisee and synergy benefits. Retain “BUY”.
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