Quarterly Update
12 MAY 2017
SHOPPERS STOP
BUY
RETAIL
Target Price: Rs 450
SSSg decline partly due to one-off
Q4 standalone sales grew 3% with SSS decline of 1.1%,as key stores
were temporarily closed for renovation. Gross margin declined 90 bps
due to lower contribution from private labels(down 200bps). However,
effective cost controls (opex down 100 bps) improved EBITDA margin
by 10bps to 5.9%. Adjusted PAT (ex-Rs 478mn impairment in
investments) grew 17% YoY to Rs 117mn. HyperCity sales grew 17%
with SSSg at 5.8%.
We cut our FY18/19E EBITDA estimates for standalone business by
6%/4% due to store closures and lower contribution from private labels.
However, we believe,Shoppers Stop is a good play on urban recovery,
uptrading and better growth expected in discretionary categories like
apparel. We estimate standalone revenue and EBITDA CAGR of
9%/20% over FY17-20E. Maintain BUY with TP of Rs 450.
CMP
Potential Upside
: Rs 359
: 25%
MARKET DATA
No. of Shares
Free Float
Market Cap
52-week High / Low
Avg. Daily vol. (6mth)
Bloomberg Code
Promoters Holding
FII / DII
: 84 mn
: 33%
: Rs 30 bn
: Rs 406 / Rs 265
: 120,724 shares
: SHOP IB Equity
: 67%
: 4% / 13%
Key highlights
♦
Shoppers Stop: Sales grew 3% YoY – significantly lower than other apparel retailers (V-Mart sales grew 42% while
Raymond’s apparel segment grew 16%). The weak sales were primarily due to temporary closure of three key stores
(Malad Inorbit Mall in Mumbai, Mantri Malleswaram in Bangalore and the South City Mall in Kolkata) due to
renovation and metro construction.We estimate sales and EBITDA CAGR of 9%/20% over FY17-20E.
The management guided for 6-7% SSSg and 40bps margin improvement in FY18
♦
HyperCity: Sales grew 17% in Q4 and 15% in FY17.Gross margin improved 40bps YoY to 21% in FY17,but store
EBITDA margin declined from 2.2% in FY16 to 0.6% in FY17 on higher investment in store infrastructure, higher
marketing for the brand and preparation for brand’s own e-commerce offering (mobile app expected to be launched
by Q3). The management guided for double-digit SSSg in FY18 and positive EBITDA by Q4FY18
(Continued on page 2…)
Financial summary (Consolidated)
Y/E March
Sales (Rs mn)
Adj PAT (Rs mn)
Change YOY (%)
P/E (x)
RoE (%)
RoCE (%)
FY17P
FY18E
FY19E
46,521
51,774
55,251
60,914
30
(238)
568
917
-
-
4.2
8.8
0.4
(2.8)
6.8
10.9
(104.4)
(894.6)
(337.9)
60.7
1,002.7
(126.2)
53.0
33.0
0.6
(4.7)
11.1
15.8
Con. EPS* (Rs)
EPS (Rs)
Key drivers
FY16
5.9
2.9
9.7
13.0
EV/E (x)
19.3
21.2
13.2
10.6
DPS (Rs)
-
0.8
1.0
1.0
Source: *Consensus broker estimates, Company, Axis Capital
^ SSSg: Same-Store-Sales growth
(%)
FY17P
FY18E
FY19E
3
5
5
SSS Growth
3.1
8.5
9.5
Std. EBITDA margin
5.0
5.8
6.4
(4.6)
(0.4)
0.3
Net store additions (nos)
HyperCity EBITDA margin
Price performance
140
120
Sensex
Shopper'S Stop
100
80
60
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Note: Our model has not been updated for the latest IndAS changes
01
12 MAY 2017
Quarterly Update
SHOPPERS STOP
RETAIL
(…Continued from page 1)
Key takeaways from conference call
♦
The store at Malad Inorbit Mall is likely to remain closed for another 18-24
months due to the ongoing metro work
♦
South City Mall Kolkata is under renovation and likely to open by end Jun’17
♦
Shoppers Stop has reported double-digit SSSg in Apr’17
♦
Company plans to revive the Shoppers Stop format through (i) new campaigns
around the brand, (ii) utilizing contemporary events for promotions (created
160 feet long bat outside its store in Bangalore), and (iii) reviving private labels
(launching new brands by celebrities, organizing designer hunt contests)
♦
Share of online sales at Shoppers Stop to increase to 10% in three years
♦
Company made an impairment provisioning of Rs 360 mn on its investment in
HyperCity and Rs 118 mn on its investment in NGIPL (JV for its duty free stores)
Management guidance
♦
Management guided to open 5 new Shopper Stop stores, 5 stores in specialty
retail and 1 HyperCity store in FY18. It also plans to resize atleast 3 HyperCity
stores and renovate and resize 5 Shoppers Stops
♦
Shoppers Stop business likely to grow at 6-7% SSSg in FY18; management
stated that the margin would expand 40bps YoY on fewer discount days and
increase in contribution from private labels
♦
HyperCity to register double-digit SSSg and report positive EBITDA on company
level by Q4FY18 (margin to improve 40-50bps) driven by controlled store
expansion (1 store per year in FY18/19), right sizing of stores (to lower space
by 100,000 sq ft) and a better merchandise and store experience
♦
Company guided for Rs 1,000 mn capex in FY18
♦
Marketing expense to increase by 20-25% over the expense in past couple of
years
♦
Debt on standalone business (Rs 5,750 mn at FY17-end) is likely to come down
by Rs 300-400 mn in one year; the management guided to turn FCF positive by
Q4FY18 and, expects debt to start declining FY19 onwards
02
Quarterly Update
12 MAY 2017
SHOPPERS STOP
RETAIL
Exhibit 1: Results update
(Rs mn)
Mar-17
Net sales
Other operating income
Total revenue
Raw material cost
(% of Net Sales)
Employee cost
(% of Net Sales)
Rent
(% of Net Sales)
Other expenses
(% of Net Sales)
EBIDTA
EBITDA margin (%)
Other income
PBIDT
Depreciation
Interest
PBT
Tax
Extra ordinary (income)/ exp.
Reported PAT
Adjusted PAT
8,966
137
9,103
5,736
64.0
711
7.9
859
9.6
1,272
14.2
525
5.9
58
583
247
132
204
86
478
(361)
117
Quarter ended (Standalone)
Mar-16
% Chg
Dec-16
8,692
132
8,825
5,481
63.1
665
7.6
812
9.3
1,368
15.7
499
5.7
73
571
258
141
172
72
0
101
101
3.2
3.2
3.2
4.7
92 bps
6.9
28 bps
5.7
23 bps
(7.0)
-155 bps
5.3
12 bps
(20.0)
2.1
(4.1)
(6.3)
18.2
20.4
(458.6)
16.6
10,537
147
10,684
6,960
66.1
700
6.6
935
8.9
1,406
13.3
684
6.5
87
771
293
150
328
138
0
190
190
% Chg
(14.9)
(7.4)
(14.8)
(17.6)
-208 bps
1.6
129 bps
(8.2)
70 bps
(9.5)
85 bps
(23.2)
-63 bps
(33.6)
(24.4)
(15.5)
(12.0)
(38.0)
(37.6)
(289.8)
(38.3)
Source: Company, Axis Capital
Exhibit 2: SOTP valuation
Financial
Shoppers Stop
EBITDA
Hypercity
Sales
Mar' 19
Target multiple
EV
Net debt
Mkt cap
INR/sh.
3,066
13.5
41,391
5,720
35,671
427
13,350
0.50
6,675
2,910
1,920
23
Price target
Source: Axis Capital
450
*Value of standalone business; also includes specialty formats like HomeStop, Mothercare and Estee Lauder stores
**Proportionate contribution for 51% stake
Exhibit 3: Number of stores
No. of stores
Shoppers Stop
HyperCity
Crossword
Home Stop
Mother Care (Standalone)
MAC/ Estee/ Clinique/ Bobbi
Total
Q4FY15
Q1FY15
Q2FY15
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
72
16
50
19
2
73
232
73
17
50
19
2
73
234
74
17
50
19
2
73
235
76
17
50
19
2
74
238
77
17
50
18
2
75
239
81
19
50
16
2
78
246
82
19
50
16
2
79
248
80
18
50
16
2
83
249
80
19
50
16
2
83
250
Source: Company, Axis Capital
03
Quarterly Update
12 MAY 2017
SHOPPERS STOP
RETAIL
8.0
1.9
Q4FY17
7.1
Q3FY17
4.8
5.6
6.5
7.6
Q4FY17
Q3FY17
Q2FY17
Q4FY16
Q3FY16
Q2FY16
Q1FY16
Q1FY17
2.9
4.4
5.7
Q4FY15
Q3FY15
Q1FY15
Q4FY17
Q3FY17
Q2FY17
Q1FY17
Q4FY16
Q3FY16
Q2FY16
Q1FY16
0
Q4FY15
30
Q3FY15
2
Q2FY15
6.2
4
32
Q1FY15
(%)
4.8
6
34.4
33.9
33.8
35.1
34.4
8
Q2FY15
34
34.4
34.1
35.9
35.0
35.7
33.4
36
(%)
6.6
Exhibit 7: Shoppers Stop - EBITDA margin
6.7
Exhibit 6: Shoppers Stop - Gross margin
37.6
Source: Company, Axis Capital
Q2FY17
Q1FY17
Q4FY16
Q3FY16
Q2FY16
Q1FY16
Q4FY15
Q3FY15
Q2FY15
Q1FY15
Q4FY17
Q3FY17
Q2FY17
Q1FY17
Q4FY16
Q3FY16
Q2FY16
Q1FY16
Q4FY15
Q3FY15
Q2FY15
Q1FY15
0
Source: Company, Axis Capital
38
12.5
10.6
8.3
5
-4
18.2
3.2
5.8
10
(1.1)
15.5
16.4
11.1
8.5
6.4
5.5
5.9
0
(%)
15
2.2
4
20
0.1
8
3.7
12
4.0
11.0
16
12.7
(%)
0.8
20
Exhibit 5: Shoppers Stop - Sales growth
17.4
Exhibit 4: Shoppers Stop - LTL growth
Source: Company, Axis Capital
Source: Company, Axis Capital
Exhibit 8: Shoppers Stop – Key metric
Q4FY15 Q1FY16
Customer entry (mn)
Conversion ratio (%)
Transaction size (Rs)
Sales / sq.ft. (Rs)
Merchandise - Bought out (%)
Merchandise - Consignment (%)
Private label contribution (%)
11.1
26.2
2,583
2,164
39.9
58.0
15.7
10.2
22.8
2,860
1,858
44.2
53.9
17.5
Q2FY15 Q3FY16
12.4
25.8
2,681
2,333
41.6
56.6
17.3
10.9
26.7
2,941
2,338
43.0
55.2
16.9
Q4FY16
Q1FY17
Q2FY17
11.2
27.1
2,725
2,300
41.8
56.4
16.9
11.1
24.5
2,761
1,927
45.1
53.2
18.1
13.2
26.2
2,709
2,370
40.5
57.9
16.2
Q3FY17 Q4FY17
11.6
26.4
3,128
2,510
40.4
58.1
15.6
11.0
27.4
2,920
2,362
38.1
60.4
15.1
Source: Company, Axis Capital
04
Quarterly Update
12 MAY 2017
SHOPPERS STOP
RETAIL
Source: Company, Axis Capital
2.4
Q3FY16
16.9
6.6
Q4FY17
Q3FY17
Q2FY17
Q1FY17
Q4FY16
Q4FY17
Q3FY17
Q2FY17
Q1FY17
Q4FY16
Q3FY16
Q2FY16
Q1FY16
Q4FY15
(203)
(90)
(129)
(109)
(41)
(65)
(91)
2
Q3FY15
1
2
Q1FY15
Q4FY17
Q3FY17
Q2FY17
Q1FY17
Q4FY16
Q3FY16
(220)
Q2FY16
19.0
Q1FY16
(180)
Q4FY15
19.5
Q3FY15
(140)
Q2FY15
20.0
Q1FY15
Q2FY15
20.0
(100)
(Rs mn)
(27)
Q1FY15
(60)
(15)
(20)
21.1
20.1
20.5
20
21.2
21.8
20.8
21.0
20.2
21.5
21.2
(%)
21.4
Exhibit 12: HyperCity - EBITDA
21.2
Exhibit 11: HyperCity - Gross margin
21.0
Source: Company, Axis Capital
21.0
Source: Company, Axis Capital
22.0
5.0
3.0
Q2FY16
6.0
Q4FY15
3.0
6.0
Q3FY15
0
Q4FY17
Q3FY17
Q2FY17
4
Q1FY16
6.0
Q2FY15
8
(0.5)
Q1FY17
Q4FY16
(0.8)
8.0
16
12
Q3FY16
Q2FY16
Q1FY16
Q4FY15
Q3FY15
Q2FY15
Q1FY15(5.2)
(8)
21.9
20
0
(4)
(%)
15.4
24
5.8
3.4
2.1
0.3
1.0
4
1.9
8
6.0
(%)
7.0
12
Exhibit 10: HyperCity - Sales growth
9.5
Exhibit 9: HyperCity - LTL growth
Source: Company, Axis Capital
Exhibit 13: HyperCity – Key metric
Q4FY15 Q1FY16
Customer entry (mn)
Conversion ratio (%)
Transaction size (Rs)
Sales / sq.ft. (Rs)
Fashion contribution (%)
4.6
43.3
1,100
1,672
14.6
4.9
45.0
1,158
2,215
16.4
Q2FY15 Q3FY16
4.9
46.7
1,119
2,153
15.4
4.8
46.7
1,193
2,188
16.8
Q4FY16
Q1FY17
Q2FY17
4.2
49.3
1,097
1,961
14.8
5.0
48.7
1,120
2,139
17.3
5.2
50.4
1,121
2,213
16.4
Q3FY17 Q4FY17
5.3
52.8
1,170
2,431
17.9
4.7
54.1
1,059
2,030
16.4
Source: Company, Axis Capital
05
Quarterly Update
12 MAY 2017
SHOPPERS STOP
RETAIL
Financial summary (Consolidated)
Profit &loss (Rs mn)
Y/E March
Net sales
Other operating income
Total operating income
Cost of goods sold
Gross profit
Gross margin (%)
Total operating expenses
EBITDA
EBITDA margin (%)
Depreciation
EBIT
Net interest
Cash flow (Rs mn)
FY16
FY17P
FY18E
FY19E
Y/E March
46,521
51,774
55,251
60,914
Profit before tax
1,179
1,289
1,418
1,560
47,700
53,063
56,669
62,474
(31,438)
(35,368)
(37,378)
(41,027)
16,262
17,695
19,291
21,446
35.0
34.2
34.9
35.2
(14,271)
(15,873)
(16,385)
(17,836)
1,991
1,822
2,906
3,610
4.3
3.5
5.3
5.9
(1,365)
(1,583)
(1,696)
(1,864)
626
239
1,210
1,746
(872)
(869)
(833)
(822)
Other income
167
162
128
121
Profit before tax
(80)
(467)
505
1,045
Total taxation
Tax rate (%)
Profit after tax
Minorities
Profit/ Loss associate co(s)
Adjusted net profit
Adj. PAT margin (%)
Net non-recurring items
Reported net profit
Paid-up capital
Chg in working capital
Cash flow from operations
FY17P
FY18E
FY19E
(80)
(467)
505
1,045
1,365
1,583
1,696
1,864
(304)
(146)
441
(1,416)
1,424
1,364
3,040
1,747
Capital expenditure
(1,775)
(1,374)
(2,108)
(1,326)
Cash flow from investing
(1,763)
(1,302)
(1,980)
(1,205)
232
-
2
2
1,068
(262)
100
(300)
(151)
(75)
(101)
(101)
Cash flow from financing
276
(1,205)
(832)
(1,221)
Net chg in cash
(63)
(1,143)
229
(680)
FY16
FY17P
FY18E
FY19E
0.4
(2.8)
6.8
10.9
Equity raised/ (repaid)
Debt raised/ (repaid)
Dividend paid
Key ratios
Y/E March
(346)
(186)
(307)
(448)
OPERATIONAL
(434.8)
(39.8)
60.7
42.8
FDEPS (Rs)
(425)
(653)
199
597
CEPS (Rs)
16.6
14.6
27.0
33.0
DPS (Rs)
-
0.8
1.0
1.0
Dividend payout ratio (%)
-
(17.2)
14.8
9.2
8.4
11.3
6.7
10.2
455
415
369
320
-
-
-
-
30
(238)
568
917
GROWTH
0.1
(0.5)
1.0
1.5
Net sales (%)
(9)
(126)
-
-
20
(364)
568
917
Balance sheet (Rs mn)
Y/E March
Depreciation & Amortisation
FY16
EBITDA (%)
25.7
(8.5)
59.5
24.2
Adj net profit (%)
(104.4)
(895.0)
(339.0)
61.5
FDEPS (%)
(104.4)
(894.6)
(337.9)
60.7
RoE (%)
0.6
(4.7)
11.1
15.8
RoCE (%)
5.9
2.9
9.7
13.0
PERFORMANCE
FY16
FY17P
FY18E
FY19E
417
418
420
422
Reserves & surplus
4,837
4,449
4,946
5,792
EFFICIENCY
Net worth
5,254
4,866
5,365
6,213
Asset turnover (x)
3.5
3.8
4.0
4.3
Borrowing
8,562
8,300
8,400
8,100
Sales/ total assets (x)
2.3
2.5
2.5
2.6
27
22
22
22
Working capital/ sales (x)
0.1
0.1
0.1
0.1
Total liabilities
13,858
13,463
14,062
14,610
Receivable days
8.0
9.7
6.9
8.6
Gross fixed assets
14,360
15,854
17,953
19,270
Inventory days
47.2
42.2
45.2
44.1
Less: Depreciation
(6,014)
(7,596)
(9,292)
(11,156)
Payable days
40.1
35.5
45.0
38.6
8,346
8,257
8,661
8,114
338
219
227
236
Total debt/ equity (x)
1.6
1.6
1.6
1.3
8,685
8,476
8,888
8,350
Net debt/ equity (x)
1.6
1.7
1.5
1.3
232
218
247
279
Current ratio (x)
1.6
1.5
1.4
1.5
Inventory
5,913
5,922
6,651
7,105
Interest cover (x)
0.7
0.3
1.5
2.1
Debtors
1,017
1,373
1,048
1,433
VALUATION
91
(326)
302
(27)
1,002.7
(126.2)
53.0
33.0
Loans & advances
3,725
3,571
4,630
5,037
EV/ EBITDA (x)
19.3
21.2
13.2
10.6
Current liabilities
6,938
7,049
8,982
8,845
EV/ Net sales (x)
0.8
0.7
0.7
0.6
Net current assets
3,920
3,618
3,777
4,831
PB (x)
5.7
6.2
5.6
4.9
Dividend yield (%)
-
0.2
0.3
0.3
(1.1)
-
3.1
1.4
Other non-current liabilities
Net fixed assets
Add: Capital WIP
Total fixed assets
Total Investment
Cash & bank
Other non-current assets
Total assets
Source: Company, Axis Capital
1,021
1,150
1,150
1,150
13,858
13,463
14,062
14,610
FINANCIAL STABILITY
PE (x)
Free cash flow yield (%)
Source: Company, Axis Capital
06
12 MAY 2017
Quarterly Update
SHOPPERS STOP
RETAIL
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
1. Axis Securities Ltd. (ASL) is a SEBI Registered Research Analyst having registration no. INH000000297. ASL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Depository participant services & distribution of various financial
products. ASL is a subsidiary company of Axis Bank Ltd. Axis Bank Ltd. is a listed public company and one of India’s largest private sector bank and
has its various subsidiaries engaged in businesses of Asset management, NBFC, Merchant Banking, Trusteeship, Venture Capital, Stock Broking, the
details in respect of which are available on www.axisbank.com.
2. ASL is registered with the Securities & Exchange Board of India (SEBI) for its stock broking & Depository participant business activities and with the
Association of Mutual Funds of India (AMFI) for distribution of financial products and also registered with IRDA as a corporate agent for insurance
business activity.
3. ASL has no material adverse disciplinary history as on the date of publication of this report.
4. I/We, authors (Research team) and the name/s subscribed to this report, hereby certify that all of the views expressed in this research report accurately
reflect my/our views about the subject issuer(s) or securities. I/We also certify that no part of my/our compensation was, is, or will be directly or
indirectly related to the specific recommendation(s) or view(s) in this report. I/we or my/our relative or ASL does not have any financial interest in the
subject company. Also I/we or my/our relative or ASL or its Associates may have beneficial ownership of 1% or more in the subject company at the
end of the month immediately preceding the date of publication of the Research Report. Since associates of ASL are engaged in various financial
service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies
mentioned in this report. I/we or my/our relative or ASL or its associates do not have any material conflict of interest. I/we have not served as director,
officer or employee in the subject company.
Research Team
Sr. No
Name
1
Akhand Singh
2
Poonam Darade
Designation
Research Analyst
Research Associate
E-mail
[email protected]
[email protected]
5. ASL or its associates has not received any compensation from the subject company in the past twelve months. ASL or its Research Analysts has not
been engaged in market making activity for the subject company.
6. In the last 12-month period ending on the last day of the month immediately preceding the date of publication of this research report, ASL or any of
its associates may have:
i.
ii.
iii.
Received compensation for investment banking, merchant banking or stock broking services or for any other services from the subject
company of this research report and / or;
Managed or co-managed public offering of the securities from the subject company of this research report and / or;
Received compensation for products or services other than investment banking, merchant banking or stock broking services from the subject
company of this research report;
ASL or any of its associates have not received compensation or other benefits from the subject company of this research report or any other third-party
in connection with this report
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12 MAY 2017
Quarterly Update
SHOPPERS STOP
RETAIL
DEFINITION OF RATINGS
Ratings
BUY
HOLD
SELL
Expected absolute returns over 12-18 months
More than 10%
Between 10% and -10%
Less than -10%
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Copyright in this document vests with Axis Securities Limited.
Axis Securities Limited, Corporate office: Unit No. 2, Phoenix Market City, 15, LBS Road, Near Kamani Junction, Kurla (west), Mumbai-400070, Tel No. –
18002100808/022-61480808, Regd. off.- Axis House, 8th Floor, Wadia International Centre, PandurangBudhkarMarg, Worli, Mumbai – 400 025. Compliance
Officer: AnandShaha, Email: [email protected], Tel No: 022-42671582.
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