Buy Shoppers Stop; target of Rs 520: ICICIdirect

ICICIdirect.com's report on Shoppers Stop

Shoppers Stop’s (SSL) consolidated Q4FY15 sales grew 9.5% YoY to Rs 1178.7 crore, marginally lower than our estimate of Rs 1196.9 crore. The total operational space declined from 5.76 million square feet (mn sq ft) in Q3FY15 to 5.71 mn sq ft in Q4FY15

Like to like (LTL) sales growth for departmental stores improved QoQ from 0.8% in Q3FY15 to 4% in Q4FY15 (I-direct estimate: 7%) while the LTL for HyperCity format was at 6.3% (I-direct estimate: 10%)

The consolidated operating margin at 3.6% was lower than our expectation of 4.8%. HyperCity, after two consecutive quarters of EBITDA breakeven, slipped into the red with a loss of Rs 6.5 crore at the EBITDA level

"Though HyperCity was unable to breakeven at the EBITDA level in FY15, its performance has shown a continuous improvement. We expect the improvement to continue in FY16E, FY17E driven by space rationalisation and higher share of fashion in product portfolio. We maintain our BUY rating with a target price of Rs 520 (SOTP based - 1x (departmental format) and 0.8x (HyperCity format) FY17E EV/sales)", says ICICIdirect.com research report.

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