Buy Pantaloon Retail; target of Rs 337: PLilladher

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Buy Pantaloon Retail; target of Rs 337: PLilladher

Prabhudas Lilladher is bullish on Pantaloon Retail and has recommended buy rating on the stock with a target of Rs 337 in its August 26, 2011 research report.

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Prabhudas Lilladher is bullish on Pantaloon Retail and has recommended buy rating on the stock with a target of Rs 337 in its August 26, 2011 research report.

"Pantaloon Retail's (PF's) Q4FY11 results were touch below our expectations, with Sales, EBITDA and PAT coming in at Rs28.6bn(up 15% YoY), Rs2.6bn(up 22%) and Rs491m (up 2%) as against our expectations of Rs31bn, Rs2.6bn and Rs525m. Same-store growth for Lifestyle, Value and Home division was 7.5%, 11.4% and -4.5%, respectively. Inflation, RM price increase and excise duty resulted in the moderation in SSS growth for Lifestyle division which reported 21% SSS for H1FY11. During Q4, PF added 0.39m sq.ft of space, taking the total retail space to 15.23m sq.ft. For FY11, space addition stands at 2.25m sq.ft and PF intends to add 1m sq.ft in Q112."

"PF's operating margins improved 60bps YoY to 9.1%. This was driven by similar gross margin expansion. While the SSS growth has clearly moderated from 1HFY11 owing to price increase, we expect the recovery to be led by festive season purchases as consumers get used to higher prices. Input prices for Apparel has corrected, however it will take time to reflect in the MRP's as there is a lag effect of seven months from sourcing yarn for fabric to production and retail sale. Core retail debt has increased by Rs3bn QoQ to Rs41.9bn (D/E=1.12x) while inventory stood at Rs35.9bn. Consolidated debt continues to remain high owing to financial services subs (t Rs78.5bn)."

"While there has been moderation in SSS growth from the peak, we expect it to recover following the festive season. PF intends to add ~1mn sqft in 1QFY12. PF has booked ~9mn Sqft of retail space for its future expansion. This can turn out to be a significant competitive advantage given the shortage of quality retail space. Monetisation of stake in non-retail businesses and positive policy action from government on FDI in multi-brand retail can act as key triggers for share price. We maintain 'BUY', with a revised SOTP-based one year target price of Rs337. Our SOTP does not factor in the value from non-retail businesses," says Prabhudas Lilladher research report.

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To read the full report click on the attachment