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Pantaloon Retail (India) Ltd
Overweight
PART.BO, PF IN
Q3FY11: SSS growth moderates; balance sheet
concerns remain
• Subdued operational performance. Pantaloon reported net sales,
EBITDA, PAT and EPS growth of 18%, 14%, 35% and 28% respectively
during Q3FY11. While earnings came in 3% below our estimates, we are
more disappointed on account of slower-than-expected topline growth
which missed our estimates by 4%.
• SSS growth rates moderated to 10.2% and 9.1% respectively for lifestyle
and home retailing business. This was on account of subdued offtake for
apparel (affected also by supply disruption on account of steep 16% price
hike iin Mar’11) and poor sales for electronics. Value segment registered
steady 10.3% SSS growth, though affected by weak growth for apparels.
Management noted that sales offtake has been better in April-May and price
hike of 16% for apparel should support better SSS growth rates in coming
quarters.
• EBITDA margins at 8.8% (+20bp q/q, -30bp y/y), though better than
estimates were affected by lower sales growth in fashion/electronics
business and significant retail space expansion during the quarter..
• Space addition on track. Pantaloon added 0.68mn sq ft during Q3 and has
added another 0.5mn sq ft during April'11 taking overall space addition
YTDFY11 to2.2x mn sq ft. Management intends to end FY11 with c2.5mn
sq ft of incremental space y/y.
• Balance sheet concerns remain. Core retail gross debt stood at Rs38bn as
of Mar’11 rising by Rs2.5bn q/q. The increase was on account of capex and
increase in working capital with aggressive space addition during the qtr.
Inventory levels saw no improvement, remaining at c100 days of sales.
• Delay/Uncertainity in monetisation of non-core retail investments to
delay PRIL’s plans to de-leverage its balance sheet. High leverage (we
estimate debt/equity would be close to 1.1x for core retail), not much
improvement on working capital front and no progress on divestment of
non-core operations will likely weigh on stock’s earnings and share price
performance in near term, in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Pantaloon Retail (India) Ltd
Overweight
PART.BO, PF IN
Q3FY11: SSS growth moderates; balance sheet
concerns remain
• Subdued operational performance. Pantaloon reported net sales,
EBITDA, PAT and EPS growth of 18%, 14%, 35% and 28% respectively
during Q3FY11. While earnings came in 3% below our estimates, we are
more disappointed on account of slower-than-expected topline growth
which missed our estimates by 4%.
• SSS growth rates moderated to 10.2% and 9.1% respectively for lifestyle
and home retailing business. This was on account of subdued offtake for
apparel (affected also by supply disruption on account of steep 16% price
hike iin Mar’11) and poor sales for electronics. Value segment registered
steady 10.3% SSS growth, though affected by weak growth for apparels.
Management noted that sales offtake has been better in April-May and price
hike of 16% for apparel should support better SSS growth rates in coming
quarters.
• EBITDA margins at 8.8% (+20bp q/q, -30bp y/y), though better than
estimates were affected by lower sales growth in fashion/electronics
business and significant retail space expansion during the quarter..
• Space addition on track. Pantaloon added 0.68mn sq ft during Q3 and has
added another 0.5mn sq ft during April'11 taking overall space addition
YTDFY11 to2.2x mn sq ft. Management intends to end FY11 with c2.5mn
sq ft of incremental space y/y.
• Balance sheet concerns remain. Core retail gross debt stood at Rs38bn as
of Mar’11 rising by Rs2.5bn q/q. The increase was on account of capex and
increase in working capital with aggressive space addition during the qtr.
Inventory levels saw no improvement, remaining at c100 days of sales.
• Delay/Uncertainity in monetisation of non-core retail investments to
delay PRIL’s plans to de-leverage its balance sheet. High leverage (we
estimate debt/equity would be close to 1.1x for core retail), not much
improvement on working capital front and no progress on divestment of
non-core operations will likely weigh on stock’s earnings and share price
performance in near term, in our view.
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