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4Q FY11 review: Pantaloon (PRIL) reported 4Q FY11 Net Sales, EBITDA
and PBT growth of 15%, 23% and 18%, respectively, for its core retail
operations. While EBITDA and earnings were in line with our estimates,
slower-than-expected sales growth missed our estimate by 5%.
SSS growth moderates: During 4Q FY11 PRIL reported SSS growth of
11.4%, 7.5% and -4.5% for lifestyle, value and home retailing segments
respectively. Inflationary pressures have had a negative impact on volume
offtake across business divisions, and we believe this weak trend could
persist in the near term.
EBITDA margin of 9.1% (+30bp q/q, +60bp y/y) was better than our
estimate supported by improved mix (higher growth for high-margin
lifestyle division than for the value/home retail business).
Red flags on balance sheet – higher debt and inventory levels: Core
retail gross debt stood at Rs41.9B (+Rs3.9B q/q) as of June’11. The
increase in debt was on account of higher capex and increased working
capital related to new store openings. Inventory as of FY11 rose to 32.5% of
sales (118 days) compared to 27% (99 days) in FY10. Inventory rise was led
by higher apparel (cotton) prices and aggressive store expansion planned for
the current quarter.
Space addition: PRIL added net 0.39mn sq ft of retail space during 4Q
FY11, taking the overall retail space to 15.24mn sq ft as of FY11 end
(+2.26mn sq ft y/y). Management noted that it had booked over 9mn sq ft of
retail space for future expansion. The company is planning to add ~1mn sq ft
in 1Q FY12.
Consolidated results: PRIL reported FY11 consolidated sales of Rs122.1B
(+25% y/y), EBITDA of Rs10.5B (+27 % y/y), and adjusted PAT of Rs1.4B
(+124% y/y).
Stock reaction could be negative: We maintain our OW rating but expect
the stock to react negatively to these results given concerns related to
slowing consumer demand and higher debt/inventory levels. We will review
our estimates after the company’s earnings call.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4Q FY11 review: Pantaloon (PRIL) reported 4Q FY11 Net Sales, EBITDA
and PBT growth of 15%, 23% and 18%, respectively, for its core retail
operations. While EBITDA and earnings were in line with our estimates,
slower-than-expected sales growth missed our estimate by 5%.
SSS growth moderates: During 4Q FY11 PRIL reported SSS growth of
11.4%, 7.5% and -4.5% for lifestyle, value and home retailing segments
respectively. Inflationary pressures have had a negative impact on volume
offtake across business divisions, and we believe this weak trend could
persist in the near term.
EBITDA margin of 9.1% (+30bp q/q, +60bp y/y) was better than our
estimate supported by improved mix (higher growth for high-margin
lifestyle division than for the value/home retail business).
Red flags on balance sheet – higher debt and inventory levels: Core
retail gross debt stood at Rs41.9B (+Rs3.9B q/q) as of June’11. The
increase in debt was on account of higher capex and increased working
capital related to new store openings. Inventory as of FY11 rose to 32.5% of
sales (118 days) compared to 27% (99 days) in FY10. Inventory rise was led
by higher apparel (cotton) prices and aggressive store expansion planned for
the current quarter.
Space addition: PRIL added net 0.39mn sq ft of retail space during 4Q
FY11, taking the overall retail space to 15.24mn sq ft as of FY11 end
(+2.26mn sq ft y/y). Management noted that it had booked over 9mn sq ft of
retail space for future expansion. The company is planning to add ~1mn sq ft
in 1Q FY12.
Consolidated results: PRIL reported FY11 consolidated sales of Rs122.1B
(+25% y/y), EBITDA of Rs10.5B (+27 % y/y), and adjusted PAT of Rs1.4B
(+124% y/y).
Stock reaction could be negative: We maintain our OW rating but expect
the stock to react negatively to these results given concerns related to
slowing consumer demand and higher debt/inventory levels. We will review
our estimates after the company’s earnings call.
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