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UBS Investment Research
Pantaloon Retail (India) Ltd.
Q 3 FY11 review
Revenues and PAT beat estimates
Pantaloon Retail (PRIL) reported Q3 FY11 core business revenue of Rs28.1bn
(+18% YoY). Same-store-sales growth (SSSG) for value, lifestyle and home
retailing was 10.3%, 10.2% and 9.1%, respectively. EBITDA grew 14% YoY to
Rs2.5bn (UBS-e Rs2.27bn). PAT grew 35% YoY to Rs505m (UBS-e Rs415m).
Debt concerns overdone, already priced into stock
In order to finance its aggressive store opening and selling space addition strategy,
and to provide for increased working capital requirements, PRIL has taken on
additional debt bringing its total debt to Rs38bn from Rs35bn in December 2010.
We believe this increase has already been factored into the stock (PRIL has
underperformed the Sensex 25% YTD).
Company in a ‘sweet spot’
Being the largest retailer in India, PRIL is in a sweet spot. Divesting the non-core
operations and creating Future Value Retail (FVRL), a wholly owned subsidiary,
for its value retail business were a step towards an opportunity to unlock value
when multi-brand retail is opened to foreign direct investment (FDI). PRIL has
added 1.26m sq feet in FVRL over the past one year versus 0.95m sq ft in PRIL
(lifestyle and home segments).
Valuation: Buy rating, Rs350 price target
We maintain our price target of Rs350. We derive our price target from a DCFbased
methodology and explicitly forecast long-term valuation drivers using
UBS’s VCAM tool. We assume a WACC of 12% and a terminal year growth rate
of 5%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Pantaloon Retail (India) Ltd.
Q 3 FY11 review
Revenues and PAT beat estimates
Pantaloon Retail (PRIL) reported Q3 FY11 core business revenue of Rs28.1bn
(+18% YoY). Same-store-sales growth (SSSG) for value, lifestyle and home
retailing was 10.3%, 10.2% and 9.1%, respectively. EBITDA grew 14% YoY to
Rs2.5bn (UBS-e Rs2.27bn). PAT grew 35% YoY to Rs505m (UBS-e Rs415m).
Debt concerns overdone, already priced into stock
In order to finance its aggressive store opening and selling space addition strategy,
and to provide for increased working capital requirements, PRIL has taken on
additional debt bringing its total debt to Rs38bn from Rs35bn in December 2010.
We believe this increase has already been factored into the stock (PRIL has
underperformed the Sensex 25% YTD).
Company in a ‘sweet spot’
Being the largest retailer in India, PRIL is in a sweet spot. Divesting the non-core
operations and creating Future Value Retail (FVRL), a wholly owned subsidiary,
for its value retail business were a step towards an opportunity to unlock value
when multi-brand retail is opened to foreign direct investment (FDI). PRIL has
added 1.26m sq feet in FVRL over the past one year versus 0.95m sq ft in PRIL
(lifestyle and home segments).
Valuation: Buy rating, Rs350 price target
We maintain our price target of Rs350. We derive our price target from a DCFbased
methodology and explicitly forecast long-term valuation drivers using
UBS’s VCAM tool. We assume a WACC of 12% and a terminal year growth rate
of 5%.
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