Buy Future Retail; target of Rs 682: Prabhudas Lilladher

Prabhudas Lilladher's research report on Future Retail

We are incorporating HyperCity merger in our estimates and cut PBT estimates by 11.3% and 8.7% for FY19 and FY20 due to higher interest and depreciation, lower other income and EBIDTA turnaround happening by 1HFY19 only. HyperCity merger has consolidated FRL's position in Hypermart format and will strengthen Big Bazaar Gen NXT brand which has premium positioning. Big Bazaar has sustained double digit SSG (7 quarters) and stands to gain from strong positioning in value fashion segment and increased focus on general merchandise.  Easy Day will gain more scale with acquisition of WH Smith and Food World with likely turnaround in FY19.

Outlook

We estimate 36.8% PAT CAGR and value the stock at 30xFY20 EPS (zero tax rate due to accumulated losses of HyperCity). Retain BUY.