shoppers stop - result update-may-13-edelbreport.myiris.com/es1/shoppers_20130502.pdf · hypercity:...

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Edelweiss Securities Limited

Shoppers Stop’s (SSL) Q4FY13 sales jumped 15% YoY with PAT increasing

10.4% YoY. Key positives include: (1) departmental store like-to-like (LTL)

sales at 10% YoY despite high base of 10% and economic slowdown; and

(2) surge in HyperCity’s LTL gross margin to 21% (20.7% in Q4FY12) and a

significant rise in LTL sales growth to 11% (3% in Q3FY13). Key negative

was 53bps YoY decline in EBITDA margin. Expansion momentum

continued with a net addition of seven stores (five in Q3FY13). With

restoration of zero excise duty on branded apparel, we anticipate

recovery in SSL’s sales volume as gross margin benefit is passed on

partially to consumers. Also, with a robust expansion plan (to add 8

departmental stores and 2 HyperCity stores in FY14) mostly funded by

internal accruals, we maintain ‘BUY’.

This report also contains Q4FY13 conference call highlights.

Gross margin expands, but high expenses dent EBITDA margin

SSL’s standalone revenue surged 15% YoY aided by LTL volume growth of 1% YoY and

9% increase in ASP. Gross margin expanded 121bps YoY in Q4FY13. However, EBITDA

margin declined 53bps YoY due to rise in staff cost (up 69bps YoY), electricity (up 15bps

YoY) and other expenses (up 67bps YoY). Net profit grew 10.4% YoY to INR152mn.

HyperCity sales recover; LTL maintained

Average selling price in the departmental store format rose 9% YoY to INR1,028,

though LTL volumes increased a mere 1% YoY (LTL volume had increased 3.5% YoY in

Q3FY13 aided by the festive season). First Citizen members club touched 2.888mn,

which contributes 69% to sales. HyperCity reported a net loss of INR218.7mn, though

store level profit surged for the seventh consecutive quarter.

Outlook and valuations: Consumer sentiment improving; maintain ‘BUY’

On FY15E, we assign EV/sales target of 1x to HyperCity business and 1.2x to SSL

departmental business arriving at target price of INR498. With recovery in sales due to

reduction in apparel prices and likely recovery in discretionary spends, we maintain

‘BUY’ and rate it ‘Sector Performer’.

RESULT UPDATE

SHOPPERS STOP Loosening purse strings spur sales

EDELWEISS 4D RATINGS

Absolute Rating BUY

Rating Relative to Sector Performer

Risk Rating Relative to Sector Low

Sector Relative to Market Overweight

MARKET DATA (R: SHOP.BO, B: SHOP IN)

CMP : INR 378

Target Price : INR 498

52-week range (INR) : 497 / 288

Share in issue (mn) : 83.0

M cap (INR bn/USD mn) : 31 / 582

Avg. Daily Vol.BSE/NSE(‘000) : 111.9

SHARE HOLDING PATTERN (%)

Current Q3FY13 Q2FY13

Promoters *

67.5 67.6 67.6

MF's, FI's & BK’s 10.6 10.4 10.4

FII's 9.6 9.7 9.4

Others 12.3 12.4 12.6

* Promoters pledged shares

(% of share in issue)

: 8.5

PRICE PERFORMANCE (%)

Stock Nifty

EW Retail

Index

1 month (5.1) 5.2 (0.0)

3 months (13.8) 0.0 (9.0)

12 months 7.5 14.3 0.6

Abneesh Roy

+91 22 6620 3141

[email protected]

Hemang Gandhi

+91 22 6620 3148

[email protected]

Pooja Lath

+91 22 6620 3075

[email protected]

India Equity Research| Retail

May 2, 2013

Financials

Year to March Q4FY13 Q4FY12 % change Q3FY13 % change FY13 FY14E FY15E

Revenues (INR mn) 6,757 5,863 15.3 6,531 3.5 33,603 42,051 49,284

EBITDA (INR mn) 383 363 5.4 453 (15.4) 961 1,566 2,121

Net profit (INR mn) 152 137 10.4 171 (11.2) (113) 459 656

Diluted EPS (INR) 1.8 1.7 9.8 2.1 (11.3) (1.4) 5.5 7.9

Diluted P/E (x) NM 68.3 47.8

EV/Sales (x) 1.1 0.9 0.7

ROAE (%) NM 8.9 11.9

Quarterly numbers are standalone; Annual numbers are consolidated

Retail

2 Edelweiss Securities Limited

Q4FY13 Conference call | Key takeaways

Q4FY13 sales: 15% YoY sales growth in SSL departmental stores as well as overall growth in

Q4FY13. SSL’s LTL sales grew 10% YoY. While LTL sales growth for stores greater than five

years was 4%, for stores less than five years it was 19%. Sales per sq. ft. on chargeable area

stood at INR2,109 (INR1,993 in Q4FY12). Contribution of apparel sales increased to 60.3% in

Q4FY13 compared to 59% in Q4FY12. Non-apparel consists of home, leather, watches,

jewellery, electronics and personal accessories. The share of non-apparel sales decreased to

41.0% in Q4FY13 vis-à-vis 39.7% in Q4FY12 primarily due to drop in fine jewellery sales. Fine

jewellery sales dipped slightly due to fluctuating gold prices. Private label sales increased by

14% YoY in Q4FY13. Private label mix increased 0.1% during the quarter.

Number of stores: As of FY13 end, there were 55 SS stores, 42 Crossword stores, 13 Home

Stop stores, 4 Mother Care stores, 46 MAC/Estee/Clinique stores and 12 HyperCity stores.

This amounts to more than 4.81mn sq. ft. across 25 cities.

LTL growth in FY14: 7-8% LTL growth expected in FY14. H1FY14 is expected to perform well

as the base is low.

Q4FY13 segment-wise YoY sales growth: Food grew 12%, fashion 37%, sports 17%;

electronics category declined.

FY13 segment-wise sales YoY growth: Fashion 28% growth, food 5% growth.

Discount season in FY13: Less than 20% of FY13 sales were during discount season.

Discounting period in Q4FY13: There was only one week of extra discounting period

(compared to the normal run rate) in Q4FY13. There was one week of less discounting

period compared to Q4FY12. In spite of this, volume grew 1% YoY. The reduction in

discounting period boosted margins and apparel growth.

Region-wise performance: North and East India have been doing well. This is followed by

South India. Lowest growth in West India. As per management, a booming stock market

improves consumer sentiment.

Full price merchandise sales in FY13: Sales have been 3-5% higher than FY12.

EBITDA margin expectations: In FY14, there will not be much change in EBITDA margin.

Excise benefits: As per management expectations, approximately one third of excise

benefit will be passed on to customers, one third will be used for advertising and promotion

and one third will be retained in margin.

New store opening plans in FY14: SS – 8, HyperCity – 2, Specialty - 10, Home stop - 2. Out

of these, as of April 2013 end, 3 SS stores, 1 HyperCity (30,000 sq. ft) store, 1 Home Stop

store, 3 Specialty stores have been opened.

HyperCity: The Company is open to operating HyperCity stores in both malls and non-mall

properties. Shoppers Stop will not be competing with Ikea. Currently, there are 4 positive

EBITDA Hyper city stores.

Shoppers Stop


Apparel share in HyperCity sales: Apparel comprised 9.8% of sales mix in Q4FY13.

Volume growth in HyperCity: All categories posted volume growth, except CDIT (Consumer

Durables and IT business). Food volumes increased 2%. Fashion volumes increased 56%.

EBITDA breakeven in HyperCity: The Company is focusing on revenue growth. Signing new

smaller stores and downsizing existing stores. Aim to grow apparel sales to 15% of total

sales (from 7.5% currently). All these 3 parameters will lead to EBITDA breakeven in the

next 2 years.

Compact HyperCity format (30,000 sq. ft): The compact format has an area of 30,000 sq. ft.

It does not have furniture and electronics (as a separate section). Going ahead, half of the

new stores to be opened will be of compact format. Compact HyperCity stores will be used

to complement the larger formats. Globally, this size is called a supermarket rather than a

hypermarket. No compact HyperCity store is planned in Mumbai in the next 18 months at

least. Trading densities in compact HyperCity stores are likely higher than larger format

stores by more than 20%.

Consumer sentiment: In H1FY13, consumption trend was slow. However, in H2FY13, the

consumption trend has improved vis-à-vis H1FY13.

Pune and Chennai: Facing tough competition in these cities as there is excess retail space.

MAC/Estee/Clinique: These are amongst the most productive and profitable formats and

hence the company plans to scale them further.

Shop in Shop: Shop in Shop will always be more profitable than standalone.

Cash from operations: INR1.2-1.25bn in FY14.

Per square feet capex: INR1,500 for both SS and HyperCity.

Capex: Same as expected cash level in FY14 (INR1.2-1.25bn). 85% of HyperCity capex will be

met via internal cash generation while balance will be via debt. Currently, there is INR3.3bn

debt in SS, INR1.5 in HyperCity.

Outlook and valuations: Consumer sentiment improving; maintain ‘BUY’

With restoration of zero excise duty route, as existed prior to Budget 2011-12, in respect of

branded readymade garments and made ups, SSL is expect to see at least 50bps YoY gross

margin expansion. As the company passes on this benefit to consumers, we expect volumes

to recover gradually, further aided by recovery in discretionary spending led by interest rate

cuts and reforms. SSL is one of the best run retail companies and will reap benefits of

expansion and FDI in HyperCity over the long term.

We value SSL on EV/sales as the company is operating at low profitability (due to losses in

HyperCity) which does not reflect the inherent profitability of the current business (thus

EV/EBITDA or P/E valuation is not fair). As we roll over to FY15 we assign EV/sales target for

HyperCity business of 1x and 1.2x to SSL departmental business. We arrive at target price of

INR498. Maintain ‘BUY’ and rate it ‘Sector Performer’.

Retail


Chart 1: LTL sales growth YoY improve Chart 2: SSL sales growth YoY

Chart 3: LTL volume growth for departmental stores Chart 4: Sales per sq. ft. on chargeable area

Chart 5: Customer entry declines YoY Chart 6: Conversion ratio improves YoY

Source: Company, Edelweiss research

0.0

7.0

14.0

21.0

28.0

35.0

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

Q4

FY

12

Q1

FY

13

Q2

FY

13

Q3

FY

13

Q4

FY

13

(%)

Deparment stores All formats

(10.0)

(4.0)

2.0

8.0

14.0

20.0

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

Q4

FY

12

Q1

FY

13

Q2

FY

13

Q3

FY

13

Q4

FY

13

(%)

LTL volume growth departmental store

4.0

6.0

8.0

10.0

12.0

14.0

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

Q4

FY

12

Q1

FY

13

Q2

FY

13

Q3

FY

13

Q4

FY

13

(mn

)

Customer entry

0.0

7.0

14.0

21.0

28.0

35.0

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

Q4

FY

12

Q1

FY

13

Q2

FY

13

Q3

FY

13

Q4

FY

13

(%)

Conversion ratio (%)

0

600

1,200

1,800

2,400

3,000

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

Q4

FY

12

Q1

FY

13

Q2

FY

13

Q3

FY

13

Q4

FY

13

(IN

R)

Shoppers' stop deparment stores

(12.0)

0.0

12.0

24.0

36.0

48.0

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

Q4

FY

12

Q1

FY

13

Q2

FY

13

Q3

FY

13

Q4

FY

13

(%)

SS deparment stores Stores>5yrs Stores<5yrs

Shoppers Stop


Chart 7: Transaction size up YoY Chart 8: Average selling price up YoY

Chart 10: Private label mix Chart 10: % sale mix

Chart 11: Division wise sales Chart 12: Category wise sales


1,600

1,850

2,100

2,350

2,600

2,850

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

Q4

FY

12

Q1

FY

13

Q2

FY

13

Q3

FY

13

Q4

FY

13

(IN

R)

Transaction size

15.0

15.1

15.1

15.2

15.2

15.2

Private label mix

(%)

Q4FY12 Q4FY13

0.0

14.0

28.0

42.0

56.0

70.0

Apparels Non Apparels

(%)

Q4FY12 Q4FY13

0

260

520

780

1,040

1,300

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

Q4

FY

12

Q1

FY

13

Q2

FY

13

Q3

FY

13

Q4

FY

13

(IN

R)

Average selling price

0.0

10.0

20.0

30.0

40.0

50.0

Mens Ladies Childrens Non

Apparels

(%)

Q4FY12 Q3FY13

0.0

12.0

24.0

36.0

48.0

60.0

Bought Out Consignment/

SOR

Concession

(%)

Q4FY12 Q4FY13

Retail


Chart 13: HyperCity- LTL sales growth improve YoY Chart 14: HyperCity- Expansion back on track


Table 1: HyperCity P&L snapshot


0.0

5.0

10.0

15.0

20.0

25.0

Q1

FY

11

Q2

FY

11

Q3

FY

11

Q4

FY

11

Q1

FY

12

Q2

FY

12

Q3

FY

12

Q4

FY

12

Q1

FY

13

Q2

FY

13

Q3

FY

13

Q4

FY

13

(%)

(INR mn) Q4FY13 Q4FY12 % change (YoY)

Retail sales (including VAT) 18,968 17,802 6.5

Retail sales (net of VAT) 17,568 16,366 7.3

Margin on sales 3,692 3,462 6.6

DC cost 232 215 7.9

Shrinkage 87 141 (38.3)

Gross margin 3,373 3,106 8.6

Store operating expenses 3,783 3,458 9.4

Other retail operating income 517 363 42.4

Store EBITDA 107 11 872.7

Service office expenses 960 952 0.8

Company EBIDTA (853) (941) NM

Exceptional item - - NM

Depreciation 530 430 23.3

Finance charges 804 853 (5.8)

PAT (2,187) (2,224) NM

0

4

8

12

16

20

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

E

(No

s.)

Shoppers Stop


Financial snapshot (INR mn)

Year to March Q4FY13 Q4FY12 % change Q3FY13 % change FY13 FY14E FY15E

Net revenues 6,757 5,863 15.3 6,531 3.5 33,603 42,051 49,284

Raw material costs 4,454 3,935 13.2 4,209 5.8 22,619 28,461 33,070

SG&A 759 619 22.6 718 5.7 3,950 4,670 5,473

Employee expenses 437 339 29.1 433 1.1 2,359 2,851 3,342

EBITDA 383 363 5.4 453 (15.4) 961 1,566 2,121

Depreciation 125 115 9.0 120 4.1 791 743 830

Other income 35 44 (20.2) 32 7.0 69 101 101

Interest 79 74 6.4 86 (8.6) 547 536 570

Exceptionals - - - (7) - -

Profit before tax 214 218 (2.0) 279 (23.3) (308) 389 821

Provision for taxes 62 81 (23.1) 108 (42.4) 228 194 287

Core profit 152 137 10.4 171 (11.2) (535) 194 534

Minority interest - - - 430 265 123

Net profit 152 137 10.4 171 (11.2) (106) 459 656

Diluted EPS (INR) 1.8 1.7 9.8 2.1 (11.3) (1.4) 5.5 7.9

As % of net revenues

Purchases (% of revenue) 65.9 67.1 64.5 67.3 67.7 67.1

Employee cost 6.5 5.8 6.6 7.0 6.8 6.8

SG&A 11.2 10.6 11.0 11.8 11.1 11.1

EBITDA 5.7 6.2 6.9 2.9 3.7 4.3

Reported net profit 2.2 2.3 2.6 (0.3) 1.1 1.3

Quarterly numbers are standalone; Annual numbers are consolidated

Retail


Company Description

SSL, part of the K Raheja Group of Companies, is a focused luxury segment department store

player. It has presence in high opportunity segments like home improvement through Home

Stop; infant and mothers to be care through Mothercare (a franchise with Mothercare PLC);

cosmetics and beauty care through M.A.C. and Clinique (a retail agreement with Estee

Lauder); the books and music space through Crossword; and in airport retailing through a JV

with Nuance from Switzerland. It also acquired majority stake in HyperCity, a hypermarket

venture promoted by a group company which focuses on mass segment of retailing.

Shopper’s Stop Ltd along with its associate companies HyperCity Retail (India) Ltd and

Timezone Entertainment Pvt. Ltd operates more than 4.82mn sq ft in the country.

Investment Theme

The Indian retail landscape is evolving with interplay of several demographic and economic

factors. The big opportunity lies in the growing share of organised retail with the growing

trend among consumers to allocate a larger share of income to consumption and gradual

improvement in lifestyle. The improving liquidity is also positive as it means better delivery

of retail space for expansion. SSL is a niche play with strong brand position in the lifestyle

space. It has assiduously positioned itself as a retailer since 1991 of superior quality

products and services, offering an international shopping experience. This strong positioning

and brand recall gives the company a strategic advantage in the light of increasing

competition. With its steadfast focus on systems and processes and its ability to attract

global brands as venture partners, it is well placed to emerge as a leading departmental

store player in the long run.

Key Risks

Store rollout delays

A large number of retailers are facing delays in roll outs due to delays by developers. This is

a significant risk and can lead to cost overruns. Additionally, delays can also lead to capital

crunch with a large number of stores bunching up.

Increased competition

Pressure on margins due to cost escalation and competition

Escalation in lease rentals

Escalation in lease rentals and administration expenses can impact margins


Shoppers Stop

Financial Statements

Income statement (INR mn)

Year to March FY12 FY13E FY14E FY15E

Net revenue 29,454 33,603 42,051 49,284

Materials costs 20,038 22,619 28,461 33,070

Gross profit 9,416 10,983 13,591 16,214

Employee costs 1,997 2,359 2,851 3,342

Electricity expenses 700 894 1,074 1,259

Rent and lease expenses 2,376 2,819 3,430 4,020

Other Expenses 2,678 3,227 3,760 4,407

Advertisement & sales costs 629 723 909 1,065

EBITDA 1,037 961 1,566 2,121

Depreciation & Amortization 609 791 743 830

EBIT 428 170 823 1,290

Other income 72 69 101 101

EBIT incl. other income 499 239 924 1,391

Interest expenses 422 547 536 570

Profit before tax 77 (308) 389 821

Provision for tax 322 228 194 287

Net profit (245) (535) 194 534

Exceptional - (7) - -

Minority interest 434 430 265 123

Profit after minority interest 190 (113) 459 656

Shares outstanding (mn) 83 83 83 83

Diluted EPS (INR) 2.3 (1.4) 5.5 7.9

Dividend per share (INR) 0.8 0.4 1.7 2.4

Dividend payout (%) 32.6 30.0 30.0 30.0

Common size metrics


Electricity expenses 2.4 2.7 2.6 2.6

Rent and lease expenses 8.1 8.4 8.2 8.2

Materials costs 68.0 67.3 67.7 67.1

Advertising & sales costs 2.1 2.2 2.2 2.2

EBITDA margins 3.5 2.9 3.7 4.3

Net profit margins 0.6 (0.3) 1.1 1.3

Growth ratios (%)


Revenues 27.8 14.1 25.1 17.2

EBITDA (19.6) (7.4) 63.0 35.4

Net profit (56.0) NM NM 43.0

EPS (57.6) NM NM 43.0

Key Assumptions


Macro

GDP(Y-o-Y %) 6.5 5.0 6.5 7.0

Inflation (Avg) 8.8 7.8 6.0 6.0

Repo rate (exit rate) 8.5 7.5 6.8 6.0

USD/INR (Avg) 47.9 54.5 55.0 53.0

Company

Revenue growth (Y-o-Y %)

Shoppers - Departmental store sales growth (%) 16.8 16.9 20.7 16.5

Shoppers - other format sales growth (%) NM 20.0 23.0 23.0

Shoppers - departmental store - Total No. of 51 59 67 75

Shoppers - departmental store - New store 11 8 8 8

Shoppers - departmental- NEW Space addition 0.8 0.3 0.4 0.3

Shoppers - departmental- Total Space (mn sq. ft) 2.9 3.2 3.7 4.0

Shoppers - SSS growth (%) 7.0 6.5 9.5 9.5

Shoppers - Growth on new stores (%) 16.8 6.7 11.2 7.0

HyperCity net sales growth (%) 27.4 17.0 19.3 18.1

HyperCity New store addition 3 - 2 2

HyperCity Total stores 12 12 15 17

HyperCity- New space addition (mn Sq ft) 0.3 - 0.1 0.1

HyperCity Total Retail Space (mn sq. ft) 1.2 1.2 1.4 1.5

HyperCity - SSS growth (%) 9.0 13.0 10.0 10.0

HyperCity - Growth on new stores (%) 11.5 - 9.3 8.1

EBITDA margin (%)

Shoppers - COGS as % of sales 65.1 65.5 65.1 64.6

COGS as % of sales 68.0 67.3 67.7 67.1

Staff costs as % of sales 6.8 7.0 6.8 6.8

A&P as % of sales 2.1 2.2 2.2 2.2

Electricity expenses as % of sales 2.4 2.7 2.6 2.6

Rent and lease expenses as % of sales 8.1 8.4 8.2 8.2

Financial assumptions

Tax rate (%) 34.3 35.1 34.3 34.3

EBITDA margin 3.5 2.9 3.7 4.3

Capex (INR mn) 1,793 879 1,150 1,250

Interest payments 422 547 536 570

Debtor days 3 3 3 3

Inventory days 36 36 36 36

Payable days 55 55 55 55

Cash conversion cycle (days) (16) (16) (17) (17)

Interest rate on o/standing debt (%) 12.1 12.1 11.5 11.5

Depreciation as % of gross block 7.3 8.1 6.9 6.9

Dividend as % of net profit 32.6 30.0 30.0 30.0

Debt 4,357 4,657 4,957 5,257


Retail

Peer comparison valuation

Market cap Diluted PE (X) EV/Sales (X) ROAE (%)

Name (USD mn) FY14E FY15E FY14E FY15E FY14E FY15E

Shoppers Stop 582 68.2 47.7 0.9 0.7 8.9 11.9

Jubilant Foodworks 1,364 37.7 29.1 3.7 2.8 36.4 33.3

Pantaloon Retail India Ltd 633 23.1 16.6 0.7 0.6 3.6 4.2

Titan Industries 4,523 27.5 22.6 1.8 1.5 38.9 36.3

Median 32.6 25.9 1.3 1.1 23.9 22.6

AVERAGE 33.3 24.9 1.6 1.3 23.9 22.4

Cash flow metrics


Operating cash flow (53) 889 1,489 1,904

Investing cash flow (1,724) (879) (1,150) (1,250)

Financing cash flow 1,720 (293) (396) (499)

Net cash flow (57) (284) (56) 155

Capex (1,793) (879) (1,150) (1,250)

Dividends paid (134) (39) (160) (229)

Share issuance/(buyback) 2 - - -

Profitability & efficiency ratios


ROAE (%) 3.7 (1.9) 8.9 11.9

ROACE (%) 5.0 1.8 8.7 13.0

Inventory day 36 36 36 36

Debtors days 3 3 3 3

Payable days 55 55 55 55

Cash conversion cycle (days) (16) (16) (17) (17)

Current ratio 1.4 1.4 1.3 1.3

Debt/EBITDA 4.2 4.8 3.2 2.5

Debt/Equity 0.8 0.9 0.9 0.9

Adjusted debt/equity 0.8 0.9 0.9 0.9

Interest coverage 1.0 0.3 1.5 2.3

Operating ratios


Total asset turnover 3.4 3.6 4.5 5.0

Fixed asset turnover 5.0 5.1 6.2 6.9

Equity turnover 5.8 6.6 8.2 8.9

Valuation parameters


Diluted EPS (INR) 2.3 (1.4) 5.5 7.9

Y-o-Y growth (%) (57.6) NM NM 43.0

CEPS (INR) 4.4 3.1 11.4 16.5

Diluted PE (x) 164.6 NM 68.2 47.7

Price/BV (x) 6.1 6.2 5.9 5.5

EV/Sales (x) 1.2 1.1 0.9 0.7

EV/EBITDA (x) 34.1 37.0 22.7 16.8

Dividend yield (%) 0.2 0.1 0.4 0.6

Balance sheet (INR mn)

As on 31st March FY12 FY13E FY14E FY15E

Equity capital 413 413 413 413

Reserves & surplus 4,748 4,595 4,894 5,322

Shareholders funds 5,160 5,008 5,307 5,734

Minority interest (BS) 39 (390) (655) (777)

Short term debt 2,883 3,074 3,272 3,470

Long term debt 944 1,025 1,091 1,157

Current maturity of long term 530 559 595 631

Borrowings 4,357 4,657 4,957 5,257

Deferred tax liability 2 2 2 2

Sources of funds 9,559 9,277 9,611 10,216

Tangible assets 5,982 6,091 6,548 6,917

Intangible assets 179 179 179 179

CWIP (incl. intangible) 321 300 250 300

Total net fixed assets 6,481 6,570 6,977 7,397

Goodwill on consolidation 987 987 987 987

Non current investments - - - -

Cash and equivalents 150 (134) (190) (35)

Inventories 3,311 3,309 4,129 4,826

Sundry debtors 258 260 314 355

Loans and advances 2,737 2,737 2,737 2,737

Other current assets 125 125 125 125

Total current assets (ex cash) 6,432 6,432 7,306 8,043

Trade payable 3,333 3,419 4,310 5,017

Others current liabilities 1,159 1,159 1,159 1,159

Total current liabilities & 4,492 4,578 5,469 6,176

Net current assets (ex cash) 1,940 1,853 1,837 1,867

Uses of funds 9,559 9,277 9,611 10,216

Book value per share (INR) 62.3 60.4 64.0 69.2

Free cash flow (INR mn)


Net profit 190 (113) 459 656

Add : Non cash charge 597 915 1,014 1,278

Depreciation 609 791 743 830

Others (13) 124 271 448

Gross cash flow 787 802 1,473 1,934

Less: Changes in WC 269 (87) (17) 30

Operating cash flow 518 889 1,489 1,904

Less: Capex 1,793 879 1,150 1,250

Free cash flow (1,275) 9 339 654


Shoppers Stop

Top 10 holdings

Perc. Holding Perc. Holding

Reliance Capital Trustee Co Ltd 6.92 Arisaig Partners Asia Pte Ltd 3.19

Miraj Marketing Pvt Ltd 2.24 Eastspring Invstment India 2.08

Zodiac Clothing Company 2.07 Bajaj Allianz Life Insurance Co 1.30

Vidya Inv Trading Co Pvt 1.23 Ashmore Emm Llc 1.15

Sundaram Asset Management Co Ltd 1.12 Lombard Odier Darier Hentsch 1.00

*as per last available data

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

27 Jun 2012 Reliance Capital Trustee Co. Limited Buy 1980500

13 Sep 2012 Mr. B. S Nagesh Sell 15000

29 Nov 2012 Mr. B S Nagesh Vice Chairman Sell 20000

10 Dec 2012 Mr. B S Nagesh, Vice Chairman Sell 39801

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

20 Jun 2012 Small Cap World Fund Inc Sell 1985925 295.00

20 Jun 2012 Reliance Capital Trustee Co. Ltd A/C Reliance Equity Opportu Buy 740500 295.00

20 Jun 2012 Reliance Capital Asset Management Ltd A/C Regular Saving Buy 1000000 295.00

*in last one year

Additional Data

Directors Data

Chandru L. Raheja Chairman Ravi C. Raheja Director

Neel C. Raheja Director Gulu L. Mirchandani Director

Shahzaad S. Dalal Director Prof. Nitin Sanghavi Director

Deepak Ghaisas Director Nirvik Singh Director

B. S. Nagesh Vice Chairman Govind Shrikhande Managing Director

Auditors - Deloitte Haskins & Sells, Mumbai; Internal Auditors: KPMG

*as per last annual report


Company Absolute

reco

Relative

reco

Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

Future Retail HOLD SU H Jubilant Foodworks HOLD SP M

Shoppers Stop BUY SP L Titan Industries BUY SO L

RATING & INTERPRETATION

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe

within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


Shoppers Stop

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91-22) 4009 4400, Email: [email protected]

Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206

Nischal Maheshwari Co-Head Institutional Equities & Head Research [email protected] +91 22 4063 5476

Nirav Sheth Head Sales [email protected] +91 22 4040 7499

Coverage group(s) of stocks by primary analyst(s): Retail

Future Retail, Jubilant Foodworks, Shoppers Stop, Titan Industries

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 120 49 17 186

* - stocks under review

Market Cap (INR) 118 56 12

Date Company Title Price (INR) Recos

Recent Research

13-Mar-13 Retail Many overhangs; time to

enter?; EdelFlash

11-Mar-13 Pantaloon

Retail

Focus on debt reduction;

calibrated expansion;

EdelFlash

184 Hold

04-Feb-13 Jubilant

Foodworks

SSG slows as expected; store

expansions on track;

Result Update

1,136 Hold

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to


Retail

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