Motilal Oswal neutral on Shoppers Stop

Motilal Oswal has maintained neutral rating on Shoppers Stop with a target of Rs 400 in its January 30, 2013 research report.
 
“Shoppers Stop, Standalone sales grew 20% to INR6b v/s our estimate of INR5.9b. Like-to-like (LTL) sales grew 12.5%, aided by strong festive and wedding season sales. LTL volumes grew 4%, the highest in eight quarters. For stores < 5 years old, LTL sales grew 25%. Gross margin expanded 40bp to 37.5%. However, increase in administrative expenses (up 60bp) and employee expenses (up 60bp) led to operating margin contraction of 70bp to 7.5%. EBITDA grew 10% to INR453m v/s our estimate of INR297m. Sharp spike in capital costs (interest cost up 14%; depreciation up 28%) led to 4% decline in PBT. Tax rate increased 530bp, leading to 11% decline in standalone PAT to INR171m (v/s our estimate of INR88m).”
 
“SHOP reported consolidated PAT of INR43m for 3QFY13 v/s loss of INR56m in 2QFY13. Strong festive season coupled with improvement in consumer sentiment helped SHOP to achieve its best LTL growth in 8 quarters. We revise our FY13/14 estimates to incorporate the better than expected 3QFY13 results. The revision is sharp for FY13. We expect margin recovery in FY14, driven by high single-digit LTL (7-8%) sales growth. SHOP trades at 52x FY14E EPS. Maintain Neutral, with a TP of INR400 (SOTP: Shoppers Stop at 20x FY15E EPS, HyperCITY at 1x FY15E sales),” says Motilal Oswal research report.

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