December 01, 2016 / 11:42 IST
Net sales grew 1.5%, below our estimate of 5%. However, good cost control (closing unprofitable stores) led to EBITDA and adj. PAT growing 11% and 53% (above our estimate of 10% and 20%). Gross margin remained flat YoY.
We believe that key strategic changes like closing unprofitable stores, plans to increase network through franchise route and efforts to increase sales in women and kids segments coupled with a better macro environment would lead to better sales growth and healthy margin improvement. The company will also benefit from GST and demonetization. We lower EPS estimates for FY17/18 by 17%/15% as we factor in demonetization impact. Maintain BUY with revised TP of Rs 535(fwd P/E of 29x) from Rs 625 earlier.
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