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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Retail Sector
Performance indicators in retail sector
Focus on key performance metrics
We study the historical financial data of eight retail companies (Jubilant Foodwork,
Provogue, Pantaloon, Shopper’s Stop, Trend, Vishal retail, Titan Industries and
Bata India.) in India. The companies include both rated and non-rated companies.
Financial data that we focus on includes sales growth, Inventory turns, free cash
flow, leverage and profit margins.
Pantaloon Retail – compelling fundamentals
PRIL’s complicated holding structure, high working capital requirements and
highly levered balance sheet are reasons for concern but current valuations are hard
to ignore. Pantaloon is trading at 18x FY12E earnings, and at a~42% discount to
sector valuation at 30x FY12E PE– despite being the dominant retailer.
Titan – quality at a price
Titan has outperformed Sensex by 90% and 8% in last 12/one month. The near
term catalysts for stock price movement include 1) better than expected Q4FY11E
results, 2) successful product launches and 3) turnaround in loss-making operations
Valuation: Retail sector trading at 30x FY12 earnings
Retail sector is trading at a valuation of ~30x FY12E PE. While sector valuation is
steep we believe faster consumption growth, improved sentiment and FDI catalysts
should maintain the premium over the staples space.
Summary
We study the historical financial data of eight retail companies in India. The
companies include both rated and non-rated companies. Financial data that we
focus on includes sales growth, Inventory turns, free cash flow, leverage and
profit margins.
Indian retail industry including organised retail has potential to be one of the
sunrise industries given strong growth aided by rising income levels. Increasing
proportion of women at work is a key driver of out-of-home consumption and
growth in organized retail.
We expect Indian retail industry to double in the next 7-8 years, with organised
retail growing at a faster pace. Mom & Pop stores however will continue to
dominate the retail space for a very long time.
We believe the most important catalyst for the sector is the potential opening up
of FDI (Foreign Direct Investment) in multi-brand retail. We expect this will
change the dynamics in sector. While long overdue, the Finance Minister failed
to provide any details on the opening up of FDI on multi-brand retail in the
Union Budget FY12. Recently, The Deputy Chairman of the Planning
Commission Dr Montek Singh Ahluwalia stated that the Planning Commission
is in favour of FDI in retail and the adverse impact of the same (potential loss of
business of the mom-and-pop retailers) has been exaggerated.
We believe this potential change in policy puts Pantaloon Retail (PRIL) in a
sweet spot. PRIL's management is open to divest. PRIL’s complicated holding
structure, high working capital requirements and highly levered balance sheet is
reason for concern but current valuations are hard to ignore. Pantaloon is trading
at 18x FY12E earnings, and ~42% discount to sector valuation at 30x FY12E
PE– despite being the dominant retailer.
Titan has outperformed Sensex by 90% and 8% in last 12/one month. The near
term catalysts for stock price movement include 1) better than expected
Q4FY11E results, 2) successful product launches and 3) turnaround in lossmaking
operations
Retail sector valuation
Retail sector is trading at a valuation of ~30x FY12E PE. While sector valuation
is steep we believe faster consumption growth, improved sentiment and FDI
catalysts should maintain the premium over the staples space. Retail companies
that are trading at significant premium include Jubilant Foodworks, Titan
Industries and Shopper’s Stop.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
India Retail Sector
Performance indicators in retail sector
Focus on key performance metrics
We study the historical financial data of eight retail companies (Jubilant Foodwork,
Provogue, Pantaloon, Shopper’s Stop, Trend, Vishal retail, Titan Industries and
Bata India.) in India. The companies include both rated and non-rated companies.
Financial data that we focus on includes sales growth, Inventory turns, free cash
flow, leverage and profit margins.
Pantaloon Retail – compelling fundamentals
PRIL’s complicated holding structure, high working capital requirements and
highly levered balance sheet are reasons for concern but current valuations are hard
to ignore. Pantaloon is trading at 18x FY12E earnings, and at a~42% discount to
sector valuation at 30x FY12E PE– despite being the dominant retailer.
Titan – quality at a price
Titan has outperformed Sensex by 90% and 8% in last 12/one month. The near
term catalysts for stock price movement include 1) better than expected Q4FY11E
results, 2) successful product launches and 3) turnaround in loss-making operations
Valuation: Retail sector trading at 30x FY12 earnings
Retail sector is trading at a valuation of ~30x FY12E PE. While sector valuation is
steep we believe faster consumption growth, improved sentiment and FDI catalysts
should maintain the premium over the staples space.
Summary
We study the historical financial data of eight retail companies in India. The
companies include both rated and non-rated companies. Financial data that we
focus on includes sales growth, Inventory turns, free cash flow, leverage and
profit margins.
Indian retail industry including organised retail has potential to be one of the
sunrise industries given strong growth aided by rising income levels. Increasing
proportion of women at work is a key driver of out-of-home consumption and
growth in organized retail.
We expect Indian retail industry to double in the next 7-8 years, with organised
retail growing at a faster pace. Mom & Pop stores however will continue to
dominate the retail space for a very long time.
We believe the most important catalyst for the sector is the potential opening up
of FDI (Foreign Direct Investment) in multi-brand retail. We expect this will
change the dynamics in sector. While long overdue, the Finance Minister failed
to provide any details on the opening up of FDI on multi-brand retail in the
Union Budget FY12. Recently, The Deputy Chairman of the Planning
Commission Dr Montek Singh Ahluwalia stated that the Planning Commission
is in favour of FDI in retail and the adverse impact of the same (potential loss of
business of the mom-and-pop retailers) has been exaggerated.
We believe this potential change in policy puts Pantaloon Retail (PRIL) in a
sweet spot. PRIL's management is open to divest. PRIL’s complicated holding
structure, high working capital requirements and highly levered balance sheet is
reason for concern but current valuations are hard to ignore. Pantaloon is trading
at 18x FY12E earnings, and ~42% discount to sector valuation at 30x FY12E
PE– despite being the dominant retailer.
Titan has outperformed Sensex by 90% and 8% in last 12/one month. The near
term catalysts for stock price movement include 1) better than expected
Q4FY11E results, 2) successful product launches and 3) turnaround in lossmaking
operations
Retail sector valuation
Retail sector is trading at a valuation of ~30x FY12E PE. While sector valuation
is steep we believe faster consumption growth, improved sentiment and FDI
catalysts should maintain the premium over the staples space. Retail companies
that are trading at significant premium include Jubilant Foodworks, Titan
Industries and Shopper’s Stop.
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