Shopper's Stop - Standalone results for 3QFY13 better than expected - Motilal Oswal

Standalone sales grew 20% to INR6b v/s our estimate of INR5.9b. Like-to-like (LTL) sales grew 12.5%, aided by strong festive and wedding season sales. LTL volumes grew 4%, the highest in eight quarters. For stores < 5 years old, LTL sales grew 25%.

Gross margin expanded 40bp to 37.5%. However, increase in administrative expenses (up 60bp) and employee expenses (up 60bp) led to operating margin contraction of 70bp to 7.5%. EBITDA grew 10% to INR453m v/s our estimate of INR297m. Sharp spike in capital costs (interest cost up 14%; depreciation up 28%) led to 4% decline in PBT. Tax rate increased 530bp, leading to 11% decline in standalone PAT to INR171m (v/s our estimate of INR88m).

In 3QFY13, SHOP added 1 Shoppers Stop store at Bangalore and opened 1 Crossword store, 3 M.A.C., 1 Clinique store. Total retail space stood at 4.8msf.

HyperCITY Retail: LTL growth improves to 3%; 3QFY13 loss at INR236m

HyperCITY Retail (51% stake) reported sales of INR2b (v/s INR1.87b in 2QFY13). LTL sales growth improved to 3% (-2% in 2QFY13) but LTL volumes fell 14%.

Gross margin rose 150bp YoY to 19.3%. Store-level EBITDA was up 2.6x QoQ at INR20m. Despite overall EBITDA loss of INR72m, LTL EBITDA improved to INR41.6m (INR38.3m in 3QFY12). Net loss was INR236m (INR209m in 2QFY13).

Revising estimates upwards; maintain Neutral

SHOP reported consolidated PAT of INR43m for 3QFY13 v/s loss of INR56m in 2QFY13. Strong festive season coupled with improvement in consumer sentiment helped SHOP to achieve its best LTL growth in 8 quarters.

We revise our FY13/14 estimates to incorporate the better than expected 3QFY13 results. The revision is sharp for FY13. We expect margin recovery in FY14, driven by high single-digit LTL (7-8%) sales growth.

SHOP trades at 52x FY14E EPS. Maintain Neutral, with a TP of INR400 (SOTP: Shoppers Stop at 20x FY15E EPS, HyperCITY at 1x FY15E sales).

Source : Equity Bulls

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