Sell Shoppers Stop; target of Rs 264: Aditya Birla Money

Aditya Birla Money is bearish on Shoppers Stop and has recommended sell rating on the stock with a target of Rs 264 in its November 6, 2012 research report.

“Shoppers Stop, 2QFY13- standalone net sales for SSL increased by 16.7% YoY to `6271.1 mn, led by SSS growth of 5%. The SSS growth was mainly price driven with increase in ASP by 9%, partially offset by volume degrowth of 4%. On positive side, the SSS growth has recovered from the dismal growth of 1% in 1QFY13. Management is optimistic of clocking 7-8% SSS in 3Q and 4QFY13, mainly led by festive season. In 2QFY13, the company opened 2 new Shoppers Stop store at Bangalore and Coimbatore, taking cumulative store count to 54. EBITDA declined by 25.0% YoY to `290.8 mn mainly due to full loading of fixed overheads led by opening of 11 Shoppers Stop stores in the last 12 months. Employee cost, Rent, Electricity expenses were up 21.0%, 28.0% and 46.6% YoY to `382.9 mn, `551.7 mn and 173.0 mn respectively. The dramatic rise in electricity expense is mainly due to increase in power tariff of grid power. Overall, EBITDA margin declined by 260 bps YoY to 4.6%.”

“Going ahead, we expect revival in growth in Shoppers Stop led by ramp-up of new stores coupled with decent SSS growth led by better consumer sentiments during festival season in 2HFY13. However, operating overheads will take 12-15 months to get fully absorbed and will continue to put pressure on the margins. We expect sales and EBITDA to grow at CAGR of 23.3% and 25.5% during FY12-FY14E period respectively. We expect the company to post EBITDA margin of 5.5% and 7.1% in FY13E and FY14E respectively. Overall, we expect PAT to grow at CAGR of 29.7% during FY12-FY14E. We have assumed 8 store addition each in FY13E and FY14E.”

“Our 1-yr fwd fair value of the stock based on SOTP methodology comes to `264/share. We have valued standalone SSL on DCF valuation method, 51% stake in Hypercity on FY14E EV/sales multiple of 1.0x and all equity investments as on FY12 balance sheet on book value. We reiterate “SELL” rating with a rolled over Nov13 price target of `264/share. As expected, the stock price has recently run-up post policy change as regards the FDI in multi-brand retail. However, due to many riders for FDI in retail, we believe not many foreign players would be interested in entering India, at this point,” says Aditya Birla Money research report.  

Public holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More