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Jun 05, 2012, 06.37 PM IST
Shoppers Stop has target of Rs 375, says Lancelot D'Cunha, ITI Wealth Management.
D`Cunha told CNBC-TV18, “Shoppers Stop today operates around 158 stores across different formats like Shopper Stop then it has Hyper City, Crossword stores, Mothercare and they have Mac, Estee Lauder. They are also looking at expanding in a big way and one of the reasons why the profits were little muted this year was because they added 12 new stores and they are planning to add another 24 new stores over the next 24 months.”
He further added, “With all these rollouts of new stores we are bound to see some immediate pressure but around 65% of it sales comes from its repeat customers which is the first citizen members and that is something which is very positive on Shoppers Stop. It also is unique in the sense, it has a very low working capital model where the investment is very low in terms of its working capital and that enables it to generate sufficiently large EBITDA. From these stores we see an EBITDA generation about Rs 185-200 crores and over the next two, three years whatever expansion they are doing will be generated, will be funded out of internal accruals and maybe they will ray some debt because the debt equity is very low, its just 0.4 times its book value. So Shoppers Stop trades about 15 times EV/EBITDA as compared to its international peers who are trading at about 20 times so given the fact that it still has a lot of reach to go I think you will find Shoppers Stop attractive with a target price- we have a one year target price of Rs 375 on the stock.”
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