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					                                                                                                            Shoppers Stop
                                                                                                         1QFY2010 Result Update




NEUTRAL                                            Performance Highlights
                                                      Top-line grows marginally: Shoppers Stop Limited (SSL) reported a
Price                                  Rs199
                                                      marginal growth of 2.4% yoy in its Revenues during 1QFY2010 to Rs319.4cr
Target Price                                   -      (Rs311.9cr), and the same was in line with our estimates. The flat growth
                                                      was the result of lower sales per sq ft, which came in at Rs 1641 per sq ft, a
Investment Period                              -      decline of 11% yoy, mainly due to lower discretionary spending on the back
                                                      of slower economic growth. Same Store Sales (SSS) growth declined further
Stock Info                                            for the third consecutive quarter, from -3% in 4QFY2009 to -7.5%, due to the
                                        Retail        lower footfalls. The movie producers’ strike during the quarter was one of
Sector                                                the main reasons for the lower footfalls in the malls and multiplexes. The
Market Cap (Rs cr)                        692         number of customers entering the stores dropped by 6% yoy.
                                                      Operating Margin expands by 650bp: Shoppers Stop’s gross margin
Beta                                      0.3
                                                      contracted by 50bp yoy, mainly due to a hit in Private Label Sales, as prices
52 WK High / Low                       345/71         of branded products were lowered during the quarter. However, on the
                                                      Operating Front, the margin improved in line with our estimates, by 650bp,
Avg. Daily Volume                      19373          to 4.8% (from negative 1.7%), thereby enabling SSL to post an EBITDA of
                                                      Rs 15.4cr (Loss of Rs5.3cr). SSL took several cost-cutting measures on
Face Value (Rs)                            10         various fronts, including the closure of loss-making formats, resulting in
BSE Sensex                             15,831
                                                      lower operating expenses for the company. Further, the issue of removal of
                                                      the service tax on lease rentals also provided a big boost to the operating
Nifty                                   4,681         profitability. SSL will continue to benefit from the service tax issue in the
                                                      coming quarters.
BSE Code                               532638
                                                      Change in depreciation policy boosts the Bottom-line: SSL’s Bottom-
NSE Code                     SHOPERSTOP               line improved significantly, by 104%, to Rs0.8cr in 1QFY2010 (Loss of
                                                      Rs24.4cr). The significant improvement in the bottom-line was mainly due to
Reuters Code                                   -
                                                      a lower depreciation charge during the quarter. SSL changed its
                                     SHOP@IN          depreciation accounting policy in order to bring it in line with the industry
Bloomberg Code
                                                      trends and to make it less aggressive. Other measures included savings in
Shareholding Pattern (%)                              fit-out costs and also passing on some costs to store owners, thereby
                                                      reducing the capex per store. This helped SSL in bringing down its
Promoters                                68.5         depreciation cost by 47.8% yoy.
MF/Banks/Indian FIs                      15.1
                                                    Key Financials (Consolidated)
FII/ NRIs/ OCBs                          10.2
                                                    Y/E March (Rs cr)                FY2008    FY2009      FY2010E       FY2011E
Indian Public/others                      6.2
                                                    Net Sales                         1,113      1,303        1,471         1,660
                                                    % chg                              33.3       18.1         12.9          12.8
                                                    Adjusted Net Profit                 2.6     (63.7)         16.0          27.7
Abs.                   3m     1yr        3yr
                                                    % chg                             (89.2)         -        125.2          72.6
Sensex (%)           30.5     8.6       45.7
                                                    EBITDA Margin (%)                   5.7        1.5          5.2           5.8
PRIL (%)             71.9   (35.6)     (55.9)       EPS (Rs)                            0.7          -          4.8           8.0
                                                    P/E (x)                           268.4          -        43.27          25.0
Viraj Nadkarni                                      P/BV (x)                            2.5        3.2          3.0           2.7
                                                    RoE (%)                             0.9          -          6.8          10.5
Tel: 022 – 4040 3800 Ext: 309
                                                    RoCE (%)                           12.3        4.1         10.6          13.9
E-mail: virajm.nadkarni@angeltrade.com
                                                    EV / Sales (x)                      0.7        0.6          0.6           0.5
                                                    EV/EBITDA                          15.1       43.2         11.5           9.2
                                                   Source: Company, Angel Research




  August 4, 2009                                                                                                                    1
                                                                                      Shoppers Stop
                                                                                                       Retail

                 Top-line grows marginally

                 Shoppers Stop Limited (SSL) reported a marginal growth of 2.4% yoy in its Revenues
                 during 1QFY2010 to Rs319.4cr (Rs311.9cr). The flat growth was the result of lower sales
                 per sq ft, which came in at Rs 1641 per sq ft, a decline of 11% yoy, mainly due to lower
                 discretionary spending on the back of slower economic growth. Same Store Sales (SSS)
                 growth declined further for the third consecutive quarter, from -3% 4QFY2009 to -7.5%,
                 due to the lower footfalls. The movie producers’ strike during the quarter was one of the
                 main reasons for the lower footfalls in the malls and multiplexes; the number of customers
                 entering the stores dropped by 6% yoy.

                     Exhibit 1: Net Sales
                      380                                                                                20
                      370
                      360                                                                                15
                      350                                                                                10
                      340
                      330                                                                                5
                      320
                      310                                                                                -
                      300                                                                                (5)
                      290
                      280                                                                                (10)
                            3QFY2008 4QFY2008 1QFY2009 2QFY2009 3QFY2009 4QFY2009 1QFY2010

                                               Net Sales (Rs cr) (RHS)         % Growth

                 Source: Company, Angel Research


                 Operating Margin expands by 650bp

                 Shoppers Stop’s gross margin contracted by 50bp yoy, mainly due to a hit in Private Label
                 Sales, as prices of branded products were lowered during the quarter. However, on the
                 Operating Front, the margin improved in line with our estimates, by 650bp, to 4.8% (from
                 negative 1.7%), thereby enabling SSL to post an EBITDA of Rs 15.4cr (Loss of Rs5.3cr).
                 SSL took several cost-cutting measures on various fronts:

                 •     The top 150 employees took 15% salary cuts, resulting in reduced Employee Costs.
                 •     The non-replacement of 300 staff at the floor level.
                 •     Office space was shrunk by 20%.
                 •     A Reduction in the units of electricity consumed.
                 •     New properties to operate on a revenue-sharing basis.
                 •     Corporate office expenses cut down by 40%.

                 Moreover, the issue of the removal of service tax on lease rentals also provided a big
                 boost to the Operating Profitability. SSL will continue to benefit from the service tax issue
                 in the coming quarters.




August 4, 2009                                                                                                  2
                                                                                              Shoppers Stop
                                                                                                          Retail

                 Exhibit 2: EBITDA Margins
                       25                                                                                 7
                                                                                                          6
                       20
                                                                                                          5
                                                                                                          4
                       15
                                                                                                          3
                       10                                                                                 2
                                                                                                          1
                        5
                                                                                                          0
                                                                                                          (1)
                        0
                               2QFY2008 3QFY2008 4QFY2008 1QFY2009 2QFY2009 3QFY2009 4QFY2009 1QFY2010    (2)
                        (5)                                                                               (3)
                                              EBIDTA (Rs cr) (LHS)             Operating profit % (RHS)

                 Source: Company, Angel Research


                 Change in depreciation policy boosts the Bottom-line

                 SSL’s Bottom-line improved significantly, by 104%, to Rs0.8cr in 1QFY2010 (Loss of
                 Rs24.4cr). The significant improvement in the bottom-line was mainly due to a lower
                 depreciation charge during the quarter. SSL changed its depreciation accounting policy
                 in order to bring it in line with the industry trends and to make it less aggressive. Other
                 measures included savings in fit-out costs and also passing on some costs to store
                 owners, thereby reducing the capex per store. This helped SSL in bringing down its
                 depreciation cost by 47.8% yoy.

                 Exhibit 3: PAT Margins

                   5

                   0
                              2QFY2008 3QFY2008 4QFY2008 1QFY2009 2QFY2009 3QFY2009 4QFY2009 1QFY2010
                  (5)

                 (10)

                 (15)

                 (20)

                 (25)
                                                 Adjusted Net Profit (Rs cr)     NP margin%
                 (30)

                 Source: Company, Angel Research

                 Performance of Hypercity improves

                 During the quarter, Hypercity opened a new store in Hyderabad, thereby taking the total
                 count of stores to four. Two more stores at Amritsar and Mumbai are planned to be rolled
                 out around Diwali. The food business segment has been clocking decent growth, while
                 the non-food business segment is still struggling to get a grip in the market.




August 4, 2009                                                                                                  3
                                                                                      Shoppers Stop
                                                                                                      Retail

                 Outlook and Valuation

                 We are bullish on the long-term growth prospects of the Retail Sector. However, we expect
                 Organised Retail to witness a temporary slowdown in the initial part of the FY2010E period,
                 and to start recovering from 3QFY2010E. Considering the new depreciation policy adopted
                 by SSL, we have modified our depreciation cost estimates downwards by 56.1% in
                 FY2010E and by 58.2% in FY2011E. Hence, we upgrade our PAT estimates for FY2010E
                 and FY2011E to Rs16cr (Loss of Rs15.3cr earlier) and Rs27.8cr (Loss of Rs3.2cr earlier),
                 respectively. Consequently, we revise our EPS estimates for FY2010E and FY2011E to Rs
                 4.6 and Rs 8, respectively. We continue to value Hypercity at Rs5 per share. In light of the
                 revised estimates, at the CMP, the stock is trading at expensive valuations of 2.7x
                 FY2011E P/BV and 0.5x FY2011E EV/Sales. We maintain a Neutral recommendation on
                 the stock.


                  Exhibit 4: 1QFY2010 Performance (Consolidated)
                  Y/E March (Rs cr)           1QFY2010     1QFY2009    % chg     FY2009     FY2008    % chg
                  Net Sales                        319.4      311.9       2.4     1,303      1,113      17.1
                  Other Income                         -          -         -         -          -         -
                  Total Revenues                   319.4      311.9        2.4    1,303      1,113      17.1
                  Total Expenditure                303.9      317.2      (4.2)    1,283      1,049      22.4
                  As % of Net Sales                 95.2      101.7          -     98.5       94.3
                  EBITDA                            15.4       (5.3)         -     19.8        63.8   (69.0)
                  EBITDA Margin (%)                  4.8       (1.7)        -       1.5         5.7
                  Depreciation                       7.8       15.0    (47.8)      76.8        43.5     76.4
                  Interest                           5.8        5.3       7.7      25.3        13.1     93.2
                  PBT                                1.9      (25.6)         -    (82.4)       7 .2        -
                  Tax                                1.0       (1.2)         -          -       7.9       -
                  PAT                                0.8      (24.4)         -      (82)      (0.7)       -
                  PAT Margin (%)                     0.3       (7.8)        -      (6.3)      (0.1)
                  Minority Int.                    (0.2)       (3.0)        -          -          -       -
                  Net Extra-Ordinary
                  Income/ (Expense)                    -           -        -      18.3         3.3
                  Adj. PAT                           1.0      (21.4)         -     (64)         2.6        -
                  Adj. PAT Margin (%)                0.3       (6.8)         -     (4.9)        0.2
                 Source: Company, Angel Research




August 4, 2009                                                                                                4
                                                                                                                                                                                 Shoppers Stop
                                                                                                                                                                                                              Retail




  Research Team: Tel: 4040 3800                                              E-mail: research@angeltrade.com                                                      Website: www.angeltrade.com

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August 4, 2009                                                                                                                                                                                                         5