Kotak PCR has maintained buy rating on Provogue with target price of Rs 1360. We expect Provogue to expand its total retail space to 0.5 million sq ft by FY10 as compared to 0.15 million sq ft in FY07.
Kotak PCR has maintained buy rating on Provogue with target price of Rs 1360 in its February 25, 2008 research report. "Provogue, a leading retailer and manufacturer of lifestyle products, is all set to benefit from the growth in consumerism, higher disposable incomes and increasing penetration of organized retail. Over the past few years the company has built a strong brand synonymous with lifestyle. The company is on an expansion mode. We expect Provogue to expand its total retail space to 0.5 million sq ft by FY10 as compared to 0.15 million sq ft in FY07"
"The company is also looking to diversify its product portfolio by adding new product lines such as accessories, personal care products, etc. With this, the company is aiming to target a larger wallet share from consumers and leverage on its strong lifestyle brand. The company has also entered the value retailing format though 'Promart'"
"Provogue is looking to target a larger base of customers as well as benefit from the strong growth in this value retailing segment. Provogue is also leveraging its retailing experience to venture into retail infrastructure development through its subsidiary Prozone Enterprises Pvt Ltd in collaboration with UK-based FTSE-100 company Liberty International Plc. The company plans to develop 16 million sq ft across retail, commercial and hotel segments in its first phase of development. We expect significant benefits to accrue to Prozone due to this joint venture with Liberty. Going forward, we estimate the company's revenues (standalone) to grow at a CAGR of 37% and PAT at a CAGR of 53% between FY07- FY10.
The company's operating margins are also expected to rise to 15% in FY10 as compared to 13.4% in FY07. We value the standalone business at a P/E multiple of 15x our estimated FY10 EPS of Rs 37.6, which gives a value of Rs 564 per share. We value the 75% stake in the Prozone subsidiary at Rs.796 per share of Provogue based on NPV of the individual projects in retail segment while land value for the hotel and commercial segment is valued according to the current value and discounted by 30%. This gives us a total valuation of Rs 1360. We recommend investors BUY with a 12 month horizon" sasy Kotak PCR research report.
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