Accumulate Shoppers Stop; target of Rs 385: PLilladher

Prabhudas Lilladher is bullish on Shoppers Stop and has recommended accumulate rating on the stock with a target of Rs 385 in its May 1, 2012 research report.

“Shoppers Stop (SHOP) reported standalone sales, EBITDA and PAT of Rs5.86bn (up 19 % YoY), Rs363m (down 3 % YoY) and Rs137m (down 31% YoY) v/s our expectations of Rs5.66bn, Rs351m and Rs143m, respectively. Consolidated numbers came below expectations due to higher-than-estimated losses in HyperCITY (Rs224m) once again. SSS performance improved sequentially with a 10% growth (Q3 was a decline of 1%) led by SSS volume growth of 1%. HyperCITY reported 6% SSS growth. Discount sales in January aided the performance partially, in our view. HyperCITY reported sales growth of 25%, while PAT came in at a loss of Rs224m (store level EBITDA of Rs1m, like-to-like store EBITDA of Rs34m). HyperCITY has posted a loss of Rs886m in FY12 (up 30% YoY). Management in recent interaction had given a breakeven guidance of FY15e.”

“Consolidated operating margins declined 60bps, notwithstanding the 130bps savings in lease costs as gross margins declined 30bps, while employee and overheads costs went up 40bps and 130bps, respectively. Standalone operations reported strong 70bps gross margin expansion. However, overheads due to expansion resulted in 140bps decline in operating margins. During Q4, SHOP added two department stores (Bengaluru & Gurgaon) and 0.1m sq.ft of operational space. We expect eight new store additions in department store format for FY13e and FY14e each.”

“We maintain our earnings estimates as Q4 numbers were largely in line with estimates (had cut estimates 35-40% over 2Q and 3Q). Recovery in same store growth to 10% was encouraging, however sustaining the same, in the absence of major discount sale period will be challenging, in our view. While improvement in gross margins is a key positive in standalone entity, we are less than satisfied with lack of visible operating leverage in the model. We roll forward our estimates to FY14 and maintain accumulate with a revised TP of Rs385. Lower consumer confidence leading to weakening in SSS growth is a major risk,” says Prabhudas Lilladher research report. 

Public holding more than 90% in Indian cos

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