Accumulate Shoppers Stop: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Shoppers Stop and has recommended accumulate rating on the stock with a target of Rs 335 in its March 14, 2012 research report.

Recovery 2 quarters away; expansion plans unchanged: Though January saw good off-take driven by discount sales, underlying consumer sentiment remains cautious and March has begun on a tepid note (traditionally weak). Correction in cotton prices should result in lower Apparel prices May onwards and should help revive the demand. Some of the brands are in the process of initiating lower price point merchandise. Management expects next two quarters to remain tepid and expects consumer sentiment to improve in 2HFY13 with the expected easing in inflation, interest rates. However, expansion plans remain unchanged. SHOP expects to add total 24 stores over next 3 years and take the department store count to 75 by FY15.

Hypercity PAT breakeven by FY15e: Hypercity is facing some challenges in Tier II cities and management is in the midst of implementing corrective actions viz. tweaking the product mix (Food currently forms ~60% and Apparel 7-8%, management is targeting 50% for Food and 15% for Apparel), rationalizing the store size. It wants to establish Hypercity as destination format and has recently started to play the value card in tier II cities aggressively. For expansion, it intends to add 2 stores each year in Metro cities for next 3 years. Hypercity is targeting store level op profit breakeven in FY13, format level op profit breakeven in FY14e and PAT breakeven for FY15e, respectively.

Maintain Accumulate: Management expects the consol debt to reach ~Rs2.8bn by Mar-12. Shoppers

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