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4QFY11: in line results
Shoppers Stop’s 4QFY11 results were in line with same store sales growth of
14% leading revenue growth of 22%. Ebitda margins increased 90bps yoy
while a higher tax rate dragged back net profit growth to 21%. Overall Ebitda
and PAT were in line with our estimates. Hypercity saw losses flat sequentially
at Rs184m. Cost driven price hikes in apparel have caused volume growth to
moderate whilst Shoppers Stop has accelerated its store expansion program.
Whilst we remain convinced of Shoppers Stop’s quality as a retailer, we see it
as being priced to perfection and retain our UNDERPERFORM stance.
4QFY11: same store sales drive strong performance
During 4QFY11, Shoppers Stop reported 22% yoy growth in revenues, led by a
14% growth in department stores same store sales. Ebitda margins expanded
90bps YoY to 7.6% (down 280bps QoQ against the seasonal peak in 3Q) driving
Ebitda growth of 38%. The same store sales performance was supported by 4%
volume growth and 10% price increases. Operating cash for the year stood at
Rs1.4b and inventory at the end of the year was only up 1% YoY whilst debt
declined 25%. Hypercity saw 4QFY11 sales increase 50% YoY (-14% QoQ due to
seasonality) and returned to break even at a store Ebitda level. Net loss in the
business was flat QoQ to Rs184m.
Store growth in focus
Shoppers Stop plans to add ~24 stores at the group level in FY12 at an
investment of Rs1.25bn. There are 10 openings planned for the department store,
8 for Crossword, 3 for Home Stop and 3-4 for Hypercity. The company will enter 6
new cities during the year (18 currently), increasing the focus on Tier II cities.
Volume growth slows, margin accretion to moderate
The company anticipates an overall increase in garment prices of 7-15% (average
10%) from input cost inflation as well as excise, a part of which has already
happened, alongside like for like volume growth of 3-4%. Same store sales
growth is likely to moderate from the 17% seen in FY11 while the store expansion
and broader inflationary pressures may increase costs. As such, we expect the
pace of margin expansion for Shoppers Stop to moderate in FY12.
Maintain forecasts and valuation, U-PF stays
We expect performance in the core business to moderate in FY12 but remain
healthy. We have maintained our bottom line estimates but have adjusted the top
line for the removal of the crossword stores from the standalone P&L (no bottom
line impact). Our Rs330 target price represents 18x FY13PE for the core business
and Rs32/share for Hypercity. We remain sceptical of current valuations given the
historic cyclicality in margins. Retain U-PF.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4QFY11: in line results
Shoppers Stop’s 4QFY11 results were in line with same store sales growth of
14% leading revenue growth of 22%. Ebitda margins increased 90bps yoy
while a higher tax rate dragged back net profit growth to 21%. Overall Ebitda
and PAT were in line with our estimates. Hypercity saw losses flat sequentially
at Rs184m. Cost driven price hikes in apparel have caused volume growth to
moderate whilst Shoppers Stop has accelerated its store expansion program.
Whilst we remain convinced of Shoppers Stop’s quality as a retailer, we see it
as being priced to perfection and retain our UNDERPERFORM stance.
4QFY11: same store sales drive strong performance
During 4QFY11, Shoppers Stop reported 22% yoy growth in revenues, led by a
14% growth in department stores same store sales. Ebitda margins expanded
90bps YoY to 7.6% (down 280bps QoQ against the seasonal peak in 3Q) driving
Ebitda growth of 38%. The same store sales performance was supported by 4%
volume growth and 10% price increases. Operating cash for the year stood at
Rs1.4b and inventory at the end of the year was only up 1% YoY whilst debt
declined 25%. Hypercity saw 4QFY11 sales increase 50% YoY (-14% QoQ due to
seasonality) and returned to break even at a store Ebitda level. Net loss in the
business was flat QoQ to Rs184m.
Store growth in focus
Shoppers Stop plans to add ~24 stores at the group level in FY12 at an
investment of Rs1.25bn. There are 10 openings planned for the department store,
8 for Crossword, 3 for Home Stop and 3-4 for Hypercity. The company will enter 6
new cities during the year (18 currently), increasing the focus on Tier II cities.
Volume growth slows, margin accretion to moderate
The company anticipates an overall increase in garment prices of 7-15% (average
10%) from input cost inflation as well as excise, a part of which has already
happened, alongside like for like volume growth of 3-4%. Same store sales
growth is likely to moderate from the 17% seen in FY11 while the store expansion
and broader inflationary pressures may increase costs. As such, we expect the
pace of margin expansion for Shoppers Stop to moderate in FY12.
Maintain forecasts and valuation, U-PF stays
We expect performance in the core business to moderate in FY12 but remain
healthy. We have maintained our bottom line estimates but have adjusted the top
line for the removal of the crossword stores from the standalone P&L (no bottom
line impact). Our Rs330 target price represents 18x FY13PE for the core business
and Rs32/share for Hypercity. We remain sceptical of current valuations given the
historic cyclicality in margins. Retain U-PF.
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