Motilal Oswal has come with its December quarterly earning estimates for retail sector. According to the research firm, retail universe is expected to post 17.3% YoY growth in sales, while EBITDA is likely to increase by 23.7% YoY. PAT is estimated to grow 22.3% led by strong performance of Titan and Jubilant Foodworks.
Motilal Oswal Q3FY13 result preview for retail sector: We estimate our retail universe to post 17.3% YoY growth in sales, while EBITDA is likely to increase by 23.7% YoY. PAT is estimated to grow 22.3% led by strong performance of Titan and Jubilant Foodworks (JUBI). Traditional retailers shall report good improvement in footfalls but profitability would remain constrained due to expansion related expenses. FDI in multi-brand retail receives parliamentary approval Government secured parliamentary approval for FDI in retail during the quarter. While it did not require parliament's approval as it was an executive decision, strong political opposition resulted in voting on the issue in parliament. We believe allowing FDI is clearly a long term positive for Indian retail industry as apart from the natural benefits like technology, back-end expertise etc which a global player may bring to the table, it allows capital starved players an access to long term capital. However, given the tough pre-conditions and complexity in stitching a deal (separate entity will be required that complies with states' FDI rules), we do not see any deal announcements in the near term. Can the recovery spill over into 4Q? Sustenance of the current recovery in consumer sentiment is a key near term monitorable. Spill-over of the recovery into 4Q would augur well for retail footfalls and margins, in our view. Given the strong expansion plans for our coverage universe, sustained improvement in same store metrics is a key catalyst for near term margins and cash flows. Also, if the footfalls sustain, we expect retailers to defer the customary discount period which begins in January. Festive season drives footfalls; expect improvement in same store performance Consumer sentiments improved during the quarter, driving footfalls on account of festive season and wedding dates. This shall aid recovery in same store growth for retailers, which saw subdued performance in the past few quarters. Our discussions with companies indicate this was the best festive season in the past three years. Jewelry volumes would show a strong improvement for Titan led by a low base, good wedding demand plus Diwali and Dhanteras sales. JUBI shall report another 20% plus same store growth, in our view. We expect Pantaloon to report significantly better same store performance in 3Q, with probable double digit growth in Lifestyle division. Continue to prefer specialty retailers; Titan is our top pick While the expected improvement in same store growth metrics is a positive development, we remain cautious on the sector. Sustenance of the same would be key for any material improvement in financials. Aggressive expansion plans of retailers shall continue to impact operating leverage in the absence of steady same store growth. We expect specialty retailers like Titan, JUBI to continue to outperform Pantaloon and Shoppers Stop. We maintain our Neutral rating on JUBI, Pantaloon and Shopper Stop. We had upgraded Titan during 2QFY13 and reiterate it as our top pick.| (INR Million) | ||||||
| Company Name | Sales | Net Profit | ||||
| Dec.12 | % YoY | % QoQ | Dec.12 | % YoY | % QoQ | |
| Jubilant Foodworks | 4,160 | 50.2 | 21.6 | 422 | 43.2 | 30.4 |
| Pantaloon Retail | 31,827 | 10 | 4 | 108 | -20.2 | 266.1 |
| Shoppers Stop | 5,930 | 18.2 | 2.3 | 88 | -54.3 | 37.9 |
| Titan Industries | 29,800 | 22.1 | 30.9 | 2,147 | 31 | 19.2 |
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
