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Pantaloon Retail India Ltd Hold
Still in an an investment mode. Maintain Hold
Weak 2QFY11 results
Pantaloon reported weak 2QFY11 results with core retail EBITDA growth of
12% and PAT growth of 5.5% despite a sales growth of 31%. Gross margins declined by 216 bps and EBITDA margins declined by 146 bps YoY due
to higher material costs and poor performance of electronics retailing business.
Investment phase continues ..
In the first half of FY11, Pantaloon has incrementally invested INR 6bn in
Working capital and INR 4.5bn on capex for core retail business; and INR
800mn on Future ventures limited (other non core businesses) while the
incremental sales for the core retail business has been only INR 6.6bn (2QFY11 vs 2QFY10).
which implies higher interest cost ..
The interest cost on a consolidated business stood at INR 1.5 bn for Q2-
FY11, up 22% QOQ (INR 1.2 bn in Q1FY11). Assuming no increase in net
debt going forward, the interest cost for the full year works out to INR 5.7
bn, c10% higher than our full year interest cost estimate of INR 5.2 bn. If
we were to factor in INR 5.7 bn as interest cost, the earnings would decline
by 17%.
The company in its conference call re-iterated its plans to divest stake in a
number of businesses - eg Insurance, Office supplies, financial services etc
however we believe that till the time the core retail business generates free
cash flow and capital is freed up from non core businesses, the company
will require capital funding and hence would remain in an investment phase
Maintain hold with a target price of INR 250 per share.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pantaloon Retail India Ltd Hold
Still in an an investment mode. Maintain Hold
Weak 2QFY11 results
Pantaloon reported weak 2QFY11 results with core retail EBITDA growth of
12% and PAT growth of 5.5% despite a sales growth of 31%. Gross margins declined by 216 bps and EBITDA margins declined by 146 bps YoY due
to higher material costs and poor performance of electronics retailing business.
Investment phase continues ..
In the first half of FY11, Pantaloon has incrementally invested INR 6bn in
Working capital and INR 4.5bn on capex for core retail business; and INR
800mn on Future ventures limited (other non core businesses) while the
incremental sales for the core retail business has been only INR 6.6bn (2QFY11 vs 2QFY10).
which implies higher interest cost ..
The interest cost on a consolidated business stood at INR 1.5 bn for Q2-
FY11, up 22% QOQ (INR 1.2 bn in Q1FY11). Assuming no increase in net
debt going forward, the interest cost for the full year works out to INR 5.7
bn, c10% higher than our full year interest cost estimate of INR 5.2 bn. If
we were to factor in INR 5.7 bn as interest cost, the earnings would decline
by 17%.
The company in its conference call re-iterated its plans to divest stake in a
number of businesses - eg Insurance, Office supplies, financial services etc
however we believe that till the time the core retail business generates free
cash flow and capital is freed up from non core businesses, the company
will require capital funding and hence would remain in an investment phase
Maintain hold with a target price of INR 250 per share.
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