Buy Future Retail; target of Rs 604: Prabhudas Lilladher

Prabhudas Lilladher's research report on Future Retail

FRL has shown encouraging 2Q with Big Bazaar SSG at 9.4% (13th quarter of almost double digit SSG), lower EBIDTA loss in Hypercity at 6.7% (11.3% in 1Q) and 3% SSG in Easyday (-15% in 1Q19). Hypercity stores have started gained trcation post renovation and more space to fashion segment. Outlook seems bright as festival season sales are up 18% and Hypercity is likley to turnaround by 4QFY19. FRL's balance sheet has strengthened as it has received Rs4.5bn from the proceeds of stake sale by Bharti Group as interest free loans. FRL is slowly integrating spate of acquisitions done over the past couple of years and is likley to focus more on organic growth and consolidation in coming periods.

Outlook

We estimate 18.3% PAT CAGR (33.8% PBT CAGR) over FY18-21 and value the stock at Rs604 based on 30xSept FY20EPS (Earlier Rs.613 on 30xJuneFY20 EPS, due to higehr tax rate in FY21). Buy.