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Building a robust retail model
Shoppers Stop has a total of 3.2m sq ft and 111 stores in 15 cities across 8 formats. The move from “premium” to “bridgeto-
luxury” positioning is resulting in better sales and margins.
Model is being de-risked by expanding consignment/concessionaire proportion from 40% in FY07 to 60% currently. Trade
working capital has reduced from INR442 per sq ft to INR101 per sq ft over three years as a result.
EBITDA margin could go up 100bps on introduction of GST as service tax can then be offset against VAT.
1.9m first citizen members, 73% of sales comes from these members. Any stock over 18 months fully written off as per
company policy ensuring no surprises on inventory write-off.
Store openings – expect 8 Shoppers Stop stores, ie total of c0.4m sq ft in FY12. Hypercity – to expand from 0.9m to 2.5m
sq ft in next 3-4 years. Breakeven expected by FY12 on EBITDA and FY14 on net profit.
Valuation and risks
Our target price of INR309 is based on SOTP. We value Shoppers Stop business at INR280 based on forward
EV/EBITDA of 12x applied to Sep-12e EBITDA. We value the 51% stake in Hypercity at INR29 on a DCF basis. We
expect a 3-year (FY10-13e) EPS CAGR of 23.5%.
Upside risk: Improvement in consumer demand; faster than expected break even in new formats, margin expansion.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Building a robust retail model
Shoppers Stop has a total of 3.2m sq ft and 111 stores in 15 cities across 8 formats. The move from “premium” to “bridgeto-
luxury” positioning is resulting in better sales and margins.
Model is being de-risked by expanding consignment/concessionaire proportion from 40% in FY07 to 60% currently. Trade
working capital has reduced from INR442 per sq ft to INR101 per sq ft over three years as a result.
EBITDA margin could go up 100bps on introduction of GST as service tax can then be offset against VAT.
1.9m first citizen members, 73% of sales comes from these members. Any stock over 18 months fully written off as per
company policy ensuring no surprises on inventory write-off.
Store openings – expect 8 Shoppers Stop stores, ie total of c0.4m sq ft in FY12. Hypercity – to expand from 0.9m to 2.5m
sq ft in next 3-4 years. Breakeven expected by FY12 on EBITDA and FY14 on net profit.
Valuation and risks
Our target price of INR309 is based on SOTP. We value Shoppers Stop business at INR280 based on forward
EV/EBITDA of 12x applied to Sep-12e EBITDA. We value the 51% stake in Hypercity at INR29 on a DCF basis. We
expect a 3-year (FY10-13e) EPS CAGR of 23.5%.
Upside risk: Improvement in consumer demand; faster than expected break even in new formats, margin expansion.
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