Anand Rathi Shares and Stock Brokers Limited (hereinafter “ARSSBL”) is a full service brokerage and equities research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix. Anand Rathi Research India Equities India I Equities Country Daily 5 August 2014 India Morning Bell All the latest research and data Titan Industries – Tackling regulatory hurdles well; Buy. In 1QFY15, revenue declined 7% yoy, to `28.9bn, and was lower than our expectations, due to high base on the jewellery division last year. Watches division’s posted a strong growth of 10% yoy, on the back of 9% volume growth, mainly driven by promotional schemes. We believe, benefit of international hedging, improvement in regulatory environment with focus on higher SSS growth and better availability of gold will drive growth for the company. We value the stock at one-year forward at 29x PE on FY16 EPS of `12.7and target price of `375. Shoppers Stop – On the road to recovery; Hold. Net sales (standalone) came in at 13.6% yoy, to `6bn, vs our expectation of `6.3bn. Like-to-like growth came in lower at 3.7% yoy as sales growth of the mature stores (greater than 5%) was (-1%) yoy as some stores were closed due to renovation. We believe the standalone business is improving. Margin expansion, with an increase in private-label sales and cost controls, would be a key growth driver. However, since Hypercity is likely to remain loss-making until FY16, we maintain Hold on the stock. We value it on SOTP, at `373, using the PE multiple for the standalone business and m.cap/sales for Hypercity and Crossword. Sensex: 25723 Nifty: 7684 India: Gap increases as exports fall more than imports Source: Government of India Chart of the day Markets 4 Aug ’14 1 Day YTD Sensex 25723 1.0% 21.5% Nifty 7684 1.1% 21.9% Dow Jones 16569 0.5% 0.0% S & P 500 1939 0.7% 4.9% FTSE 6678 0.0% -1.1% Nikkei* 15471 0.0% -5.0% Hang Seng* 24594 -0.1% 5.5% Volumes (US$m) 4 Aug ’14 1 Day Avg '14 Cash BSE 399 -27.4% 514 Cash NSE 2,478 -19.1% 2,585 Derivatives (NSE) 21,032 -28.3% 29,210 Flows (US$m) 4 Aug ’14* MTD YTD FII – Cash Buy 689 689 84,842 Sell 628 628 73,891 Net 61 61 11,811 FII - Derivatives Buy 2,487 2,487 486,418 Sell 2,347 2,347 484,952 Net 140 140 773 DII – Cash Buy 227 227 15,053 Sell 268 268 16,126 Net -41 -41 -943 Others 4 Aug ’14 1 Day YTD Oil Brent (US$/bbl)* 105.4 0.0% -2.3% Gold (US$/oz)* 1,288.3 0.0% 6.9% Steel (US$/MT) 600.0 0.0% 2.6% `/US$ 60.94 0.0% 1.4% US$/Euro* 1.34 0.0% 2.4% Yen/US$* 102.59 0.0% 2.7% Call Rate 7.00% -100.bps -175.bps 10-year G-Secs 8.51% -2.2bps -32.bps EMBI spreads 299.06 1.7bps -35.2bps @7:30am *Provisional Source: BSE, Bloomberg
17
Embed
India Morning Bell - rathionline.com BELL.pdf5 August 2014 India Morning Bell Anand Rathi Research India Equities Market Data Price Performance Price Performance Price Performance
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Anand Rathi Shares and Stock Brokers Limited (hereinafter “ARSSBL”) is a full service brokerage and equities research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix. Anand Rathi Research India Equities
India I Equities Country
Daily
5 August 2014
India Morning Bell
All the latest research and data
Titan Industries – Tackling regulatory hurdles well; Buy. In 1QFY15, revenue declined 7% yoy, to `28.9bn, and was lower than our expectations, due to high base on the jewellery division last year. Watches division’s posted a strong growth of 10% yoy, on the back of 9% volume growth, mainly driven by promotional schemes. We believe, benefit of international hedging, improvement in regulatory environment with focus on higher SSS growth and better availability of gold will drive growth for the company. We value the stock at one-year forward at 29x PE on FY16 EPS of `12.7and target price of `375.
Shoppers Stop – On the road to recovery; Hold. Net sales (standalone) came in at 13.6% yoy, to `6bn, vs our expectation of `6.3bn. Like-to-like growth came in lower at 3.7% yoy as sales growth of the mature stores (greater than 5%) was (-1%) yoy as some stores were closed due to renovation. We believe the standalone business is improving. Margin expansion, with an increase in private-label sales and cost controls, would be a key growth driver. However, since Hypercity is likely to remain loss-making until FY16, we maintain Hold on the stock. We value it on SOTP, at `373, using the PE multiple for the standalone business and m.cap/sales for Hypercity and Crossword.
Sensex: 25723
Nifty: 7684
India: Gap increases as exports fall more than imports
Source: Government of India
Ch
art
of
the
da
y
Markets 4 Aug ’14 1 Day YTD Sensex 25723 1.0% 21.5%Nifty 7684 1.1% 21.9%Dow Jones 16569 0.5% 0.0%S & P 500 1939 0.7% 4.9%FTSE 6678 0.0% -1.1%Nikkei* 15471 0.0% -5.0%Hang Seng* 24594 -0.1% 5.5%
Anand Rathi Shares and Stock Brokers Limited (hereinafter “ARSSBL”) is a full service brokerage and equities research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix. Anand Rathi Research India Equities
India I Equities Retail
Result Update
`
Rating: Buy Target Price: `375 Share Price: `337
Key data TTAN IN / TITN.BO52-week high / low `362 / `203Sensex / Nifty 25723 / 76843-m average volume US$10.2m Market cap `289bn / US$4.7bnShares outstanding 887.8
Shareholding pattern (%) Jun ’14 Mar ’13 Dec ’13
Promoters 53.05 53.05 53.05
- of which, Pledged - - -
Free Float 46.95 46.95 46.95
- Foreign Institutions 21.51 21.69 21.58
- Domestic Institutions 2.84 2.41 1.97
- Public 22.60 23.4 22.88
5 August 2014
Titan Industries
Tackling regulatory hurdles well; Buy
Key takeaways
Revenue dips on higher base. In 1QFY15, revenue declined 7% yoy, to `28.9bn, and was lower than our expectations, due to high base on the jewellery division last year. Watches division’s posted a strong growth of 10% yoy, on the back of 9% volume growth, mainly driven by promotional schemes. SSS for World of Titan was just 2%, while it improved dramatically for Helios at 20% yoy growth. Jewellery contributed 80% to revenues and declined 11% yoy, with grammage down 24% yoy (high base).
Suspension of Golden harvest scheme. In line with the regulations of the new company’s act, the company has suspended the ‘Golden harvest scheme’. It will launch a new scheme in compliant with the current law by Oct’14.
EBITDA margin improves yoy. EBITDA margin for the company improved 160bps yoy, to 9.5%, in line with our expectation. EBIT margin in jewellery is 9.4% in 1QFY15 against 8.8% in 1QFY14; EBIT margin in the watches division has been improving from the past four quarters from 10.5% in 1QFY14 to 13% 1QFY15 on the back of higher volumes.
Store additions. In 1Q, the company added three stores of Tanishq with the total area up from 0.639 msf to 0.674msf. For FY15x, it targets to add another 0.1msf in Tanishq. Management expects debt level to remain at ~`8bn.
Our take. We believe, benefit of international hedging, improvement in regulatory environment with focus on higher SSS growth and better availability of gold will drive growth for the company. We value the stock at one-year forward at 29x PE on FY16 EPS of `12.7and target price of `375. Risks. Regulatory hurdles and volatility in gold prices.
We believe, benefit of international hedging, improvement in regulatory environment with focus on higher SSS growth and better availability of gold will drive growth for the company. We value the stock at one-year forward at 29x PE on FY16 EPS of `12.7and target price of `375.
Fig 15 – 12-month forward PE: Standard deviation and mean
Mean
+1SD
+2SD
-1SD
-2SD
-
5
10
15
20
25
30
35
40
45
50
May
-02
May
-03
May
-04
May
-05
May
-06
Jun-
07
Jun-
08
Jun-
09
Jun-
10
Jul-1
1
Jul-1
2
Jul-1
3
Jul-1
4
(x)
Source: Anand Rathi Research
Risks
Regulatory hurdles
Volatility in gold prices
Fig 12 – No. of stores: Jewellery
0
20
40
60
80
100
120
140
160
180
200
Jun-
10
Sep-
10
Dec
-10
Mar
-11
Jun-
11
Sep-
11
Dec
-11
Mar
-12
Jun-
12
Sep-
12
Dec
-12
Mar
-13
Jun-
13
Sep-
13
Dec
-13
Mar
-14
Jun-
14
Tanishq Gold plus
(no's)
Source: Company, Anand Rathi Research
Fig 13 – No. of stores: Watches
0
100
200
300
400
500
600
700
Jun-
10
Sep-
10
Dec
-10
Mar
-11
Jun-
11
Sep-
11
Dec
-11
Mar
-12
Jun-
12
Sep-
12
Dec
-12
Mar
-13
Jun-
13
Sep-
13
Dec
-13
Mar
-14
Jun-
14
World of Titans Fasttrack Outlets Helios Outlets
(no's)
Source: Company, Anand Rathi Research
Appendix Analyst Certification The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report. Important Disclosures on subject companies Rating and Target Price History (as of 4 August 2014)
The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:
Ratings Guide Buy Hold Sell Large Caps (>US$1bn) >15% 5-15% <5% Mid/Small Caps (<US$1bn) >25% 5-25% <5%
Anand Rathi Research Ratings Distribution (as of 4 August 2014) Buy Hold Sell Anand Rathi Research stock coverage (196) 60% 27% 13%
% who are investment banking clients 4% 0% 0%
Other Disclosures This report has been issued by ARSSBL which is a SEBI regulated entity, and which is in full compliance with all rules and regulations as are applicable to its functioning and governance. The investors should note that ARSSBL is one of the companies comprising within ANAND RATHI group, and ANAND RATHI as a group consists of various companies which may include (but is not limited to) its subsidiaries, its affiliates, its group companies who may hold positions, views, stakes and may service the companies covered in this report independent of ARSSBL. Investors are cautioned to be aware that there could arise a potential conflict of interest in the views held by ARSSBL and other companies of Anand Rathi who maybe affiliated, connected or catering to the companies mentioned in the Research Report; even though, ARSSBL and Anand Rathi are fully complaint with all procedural and operational regulatory requirements. Thus, investors should not use this as a sole basis for making their investment decision and should consider the recommendations mentioned in the Research Report bearing in mind the aforementioned.
Further, the information herein has been obtained from various sources which we believe is reliable, and we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities (hereinafter referred to as “Related Investments”). ARSSBL and/or Anand Rathi may trade for their own accounts as market maker / jobber and/or arbitrageur in any securities of the companies mentioned in the Research Report or in related investments, and may be on taking a different position from the ones which haven been taken by the public orders. ARSSBL and/or Anand Rathi and its affiliates, directors, officers, and employees may have a long or short position in any securities of the companies mentioned in the Research Report or in Related Investments. ARSSBL and/or Anand Rathi, may from time to time, perform investment banking, investment management, financial advisory or any other services not explicitly mentioned herein, or solicit investment banking or other business from, any entity and/or company mentioned in this Research Report; however, the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the other companies of Anand Rathi, even though there might exist an inherent conflict of interest.
Furthermore, this Research Report is prepared for private circulation and use only. It does not have regard to the specific investment objectives, financial situation and the specific financial needs or objectives of any specific person who may receive this Research Report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this Research Report, and, should understand that statements regarding future prospects may or may not be realized, and we can not guarantee the same as analysis and valuation is a tool to enable investors to make investment decisions but, is not an exact and/or a precise science. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investments mentioned in this report.
Other Disclosures pertaining to distribution of research in the United States of America
This material was produced by ARSSBL, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by Enclave Capital LLC (19 West 44th Street, Suite 1700, New York, NY 10036) and elsewhere in the world by ARSSBL or an authorized affiliate of ARSSBL (such entities and any other entity, directly or indirectly, controlled by ARSSBL, the “Affiliates”). This document does not constitute an offer of, or an invitation by or on behalf of ARSSBL or its Affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which ARSSBL or its Affiliates consider to be reliable. None of ARSSBL or its Affiliates accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.
1. ARSSBL or its Affiliates may or may not have been beneficial owners of the securities mentioned in this report.
2. ARSSBL or its affiliates may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months.
3. ARSSBL or its affiliates may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and do not expect to receive compensation for investment banking services from the issuer of these securities within the next three months.
4. However, one or more of ARSSBL or its Affiliates may, from time to time, have a long or short position in any of the securities mentioned herein and may buy or sell those securities or options thereon, either on their own account or on behalf of their clients.
5. As of the publication of this report, ARSSBL does not make a market in the subject securities.
6. ARSSBL or its Affiliates may or may not, to the extent permitted by law, act upon or use the above material or the conclusions stated above, or the research or analysis on which they are based before the material is published to recipients and from time to time, provide investment banking, investment management or other services for or solicit to seek to obtain investment banking, or other securities business from, any entity referred to in this report.
Enclave Capital LLC is distributing this document in the United States of America. ARSSBL accepts responsibility for its contents. Any US customer wishing to effect transactions in any securities referred to herein or options thereon should do so only by contacting a representative of Enclave Capital LLC.
Additional information on recommended securities/instruments is available on request.
Anand Rathi Shares and Stock Brokers Limited (hereinafter “ARSSBL”) is a full service brokerage and equities research firm and the views expressed therein are solely of ARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only within India and to no countries outside India. Disclosures and analyst certifications are present in Appendix. Anand Rathi Research India Equities
India I Equities
Retail
Result Update `
Rating: Hold Target Price: `373 Share Price: `392
Key data SHOP IN / SHOP.BO52-week high / low `459 / `318Sensex / Nifty 25723/7684
Revenue growth below expected. Net sales (standalone) came in at 13.6% yoy, to `6bn, vs our expectation of `6.3bn. Like-to-like growth came in lower at 3.7% yoy as sales growth of the mature stores (greater than 5%) was (-1%) yoy as some stores were closed due to renovation. Consignment/SOR revenue came at 54% (57.9% in 4QFY14), bought-out items 43.5% and concession sales 2.6%. First Citizen’s share of revenue continues to remain ~72% (72% in 4QFY14 and 73% in 1QFY14), with 3.4m members.
EBITDA margin improves yoy. EBITDA margin improved 75bps to 3.8% in 1QFY15 vs 3.1% in 1QFY14 due to cost optimization measures. Private label sales grew 9% yoy, but proportion reduced to 17.1% vs 17.4% yoy. Mgmt expects EBITDA margin to expand to 8%+ as store expansion slows.
Hypercity performance lacklustre. Revenue from Hypercity (51% subsidiary) rose 7.9%, with comparable sales declining 5% due to a cut in store area. Gross margins have improved 130bps yoy, to 21%, mainly due to downsizing of stores and a greater share of fashion mix to 15% vs 11% last quarter. However, it posted a loss of `184m during the quarter vs `247m yoy.
New store additions. The area increased from 5.41m sq.ft. in 4QFY14 to 5.5m sq.ft. in 1QFY15 with the addition of two Shoppers Stop department stores (to 69 now), two MAC stores and two Clinique stores.
Our take. We believe the standalone business is improving. Margin expansion, with an increase in private-label sales and cost controls, would be a key growth driver. However, since Hypercity is likely to remain loss-making until FY16, we maintain Hold on the stock. We value it on SOTP, at `373, using the PE multiple for the standalone business and m.cap/sales for Hypercity and Crossword. Risk. Slower growth in the economy.
In 1QFY15, Shoppers Stop’s net sales (standalone) came in at 13.6% yoy to `6bn vs our expectation of `6.3bn. Like-to-like growth came in lower at 3.7% yoy as sales growth of the mature stores (greater than 5%) was -1% yoy as some stores were closed due to renovation. Consignment/SOR revenue came at 54% (57.9% in 4QFY14), bought-out items 43.5% and concession sales 2.6%. First Citizen’s share of revenue continues to remain ~72% (72% in 4QFY14 and 73% in 1QFY14), with 3.4m members.
Fig 8 – First Citizen members and their contribution to sales
1.5
2.0
2.5
3.0
3.5
4.0
1QFY
11
2QFY
11
3QFY
11
4QFY
11
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
(m)
66
67
68
69
70
71
72
73
74
75
(%)
First citizen member First citizen member contribution to sales (RHS) Source: Company
Fig 9 – Comparable volume growth; average selling price
0
200
400
600
800
1,000
1,200
1,400
Q1F
Y11
Q2F
Y11
Q3F
Y11
Q4F
Y11
Q1F
Y12
Q2F
Y12
Q3F
Y12
Q4F
Y12
Q1F
Y13
Q2F
Y13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
(`)
-15
-10
-5
0
5
10
15
20
(%)
ASP LTL Volume growth (RHS)
Source: Company, Anand Rathi Research
Fig 10 – Comparable sales growth
-2%0%2%4%6%8%
10%12%14%16%18%20%22%24%
1QFY
11
2QFY
11
3QFY
11
4QFY
11
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
Source: Company
5 August 2014 Shoppers Stop – On the road to recovery; Hold
Anand Rathi Research 4
Fig 11 – Sales/sq.ft. and total area
2.0
2.5
3.0
3.5
4.0
4.5
1QFY
11
2QFY
11
3QFY
11
4QFY
11
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
(msf)
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
(`)
Area m sq.ft Sales per sq.ft. (RHS) Source: Company
EBITDA margin expands
EBITDA margin improved 75bps to 3.8% in 1QFY15 vs 3.1% in 1QFY14 on the back of cost optimization measures. Private label sales grew 9% yoy but proportion reduced to 17.1% vs 17.4% yoy. Management expects EBITDA margin to expand to over 8% as the store expansion slows down.
Hypercity remains a drag
Revenue from Hypercity (a 51% subsidiary) increased 7.9%, with comparable sales declining 5% due to a cut in store area. There is improvement in margins by 130bps yoy to 21% in Q1FY15 mainly due to two actions taken by the company one is downsizing the stores, and increasing in fashion mix to 15% v/s 11% in last quarter. However, it posted a loss of `184m during the quarter vs `247m yoy.
The new stores will not be selling furniture, white goods, mobiles, etc., aiding an expansion in EBITDA margin. So far, in Hypercity, eight stores are EBITDA positive.
Fig 12 – Private-label sales and growth
600
750
900
1,050
1,200
1,350
1,500
1QFY
11
2QFY
11
3QFY
11
4QFY
11
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
(`m)
0
5
10
15
20
25
30
(%)
Private label sales Private label sales growth (RHS) Source: Company
Fig 13 – Private sales vs non-private sales
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1QFY
11
2QFY
11
3QFY
11
4QFY
11
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
Non Private labels Private labels Source: Company
5 August 2014 Shoppers Stop – On the road to recovery; Hold
Anand Rathi Research 5
Fig 14 – EBITDA and EBITDA margin
0
100
200
300
400
500
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
(`m)
0
2
4
6
8
(%)
EBITDA EBITDA Margin (RHS) Source: Bloomberg, Company, Anand Rathi Research
Other highlights
The area increased from 5.41m sq.ft. in 4QFY14 to 5.5m sq.ft. in 1QFY15 with the addition of two Shoppers Stop department stores (to 69 now), two MAC stores and two Clinique stores. In FY15, we expect the company to open eight stores, taking the store count to 75. Another eight stores are likely to be added in FY16.
Fig 15 – Revenue vs store growth
0
10
20
30
40
50
60
70
80
Q1F
Y12
Q2F
Y12
Q3F
Y12
Q4F
Y12
Q1F
Y13
Q2F
Y13
Q3F
Y13
Q4F
Y13
Q1F
Y14
Q2F
Y14
Q3F
Y14
Q4F
Y14
Q1F
Y15
(nos.)
3,500
4,250
5,000
5,750
6,500
7,250
8,000
8,750
(`m)
Shoppers stop store Home Stores Mother care
MAC/Estee/Clinique Revenue (RHS) Source: Company, Anand Rathi Research
Fig 16 – Store count Stores No.s
Shoppers Stop Department stores 69
Crossword 48
Homestop 18
Mother Care 4
MAC/Estee/Clinique/Bobbi Brown 72
Hypercity 15
Total 226
Source: Company
5 August 2014 Shoppers Stop – On the road to recovery; Hold
Anand Rathi Research 6
Valuations
We maintain Hold, and value the stock on a sum-of-parts basis at `373, using the PE multiple for the standalone business and m.cap/sales for Hypercity and Crossword.
Fig 19 – Sum-of-parts calculation
Basis of Valuation Driver Value (`m) Multiple (x) Value (`m)Value Per share (`)
Standalone Business P/E Mar'16 1,216 17.0 20,667 249 Other Businesses Hypercity M Cap /sales - Mar'16 10,740 1.5 16,110 99 Crossword M Cap /sales - Mar'16 1,381 1.5 2,071 25
Fair Value (per share) 38,849 373Source: Anand Rathi Research
Risks
Revival in the macro-economic scenario
Increase/decrease in the pace of expansion.
Fig 17 – Sales/sq.ft. and total area (Hypercity)
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
(msf)
0
500
1,000
1,500
2,000
2,500
(`)
Area Sales per sq. ft. (RHS) Source: Company, Anand Rathi Research
Fig 18 – Gross and EBITDA margins (Hypercity)
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
1QFY
12
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
4QFY
14
1QFY
15
(%)
Gross margin EBITDA margin Source: Company, Anand Rathi Research
Appendix Analyst Certification The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report. Important Disclosures on subject companies Rating and Target Price History (as of 4 August 2014)
Shoppers Stop
3
1
2
300
340
380
420
460
500
Jan-
13
Apr-1
3
Jul-1
3
Oct
-13
Jan-
14
Apr-1
4
Jul-1
4
Date Rating TP (`)
Share Price (`)
1 15-Jan-13 Hold 440 450 2 29-Oct-13 Hold 357 338 3 2-May-14 Hold 366 364
The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:
Ratings Guide Buy Hold Sell Large Caps (>US$1bn) >15% 5-15% <5% Mid/Small Caps (<US$1bn) >25% 5-25% <5%
Anand Rathi Research Ratings Distribution (as of 4 August 2014) Buy Hold Sell Anand Rathi Research stock coverage (196) 60% 27% 13%
% who are investment banking clients 4% 0% 0%
Other Disclosures This report has been issued by ARSSBL which is a SEBI regulated entity, and which is in full compliance with all rules and regulations as are applicable to its functioning and governance. The investors should note that ARSSBL is one of the companies comprising within ANAND RATHI group, and ANAND RATHI as a group consists of various companies which may include (but is not limited to) its subsidiaries, its affiliates, its group companies who may hold positions, views, stakes and may service the companies covered in this report independent of ARSSBL. Investors are cautioned to be aware that there could arise a potential conflict of interest in the views held by ARSSBL and other companies of Anand Rathi who maybe affiliated, connected or catering to the companies mentioned in the Research Report; even though, ARSSBL and Anand Rathi are fully complaint with all procedural and operational regulatory requirements. Thus, investors should not use this as a sole basis for making their investment decision and should consider the recommendations mentioned in the Research Report bearing in mind the aforementioned.
Further, the information herein has been obtained from various sources which we believe is reliable, and we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities (hereinafter referred to as “Related Investments”). ARSSBL and/or Anand Rathi may trade for their own accounts as market maker / jobber and/or arbitrageur in any securities of the companies mentioned in the Research Report or in related investments, and may be on taking a different position from the ones which haven been taken by the public orders. ARSSBL and/or Anand Rathi and its affiliates, directors, officers, and employees may have a long or short position in any securities of the companies mentioned in the Research Report or in Related Investments. ARSSBL and/or Anand Rathi, may from time to time, perform investment banking, investment management, financial advisory or any other services not explicitly mentioned herein, or solicit investment banking or other business from, any entity and/or company mentioned in this Research Report; however, the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the other companies of Anand Rathi, even though there might exist an inherent conflict of interest.
Furthermore, this Research Report is prepared for private circulation and use only. It does not have regard to the specific investment objectives, financial situation and the specific financial needs or objectives of any specific person who may receive this Research Report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this Research Report, and, should understand that statements regarding future prospects may or may not be realized, and we can not guarantee the same as analysis and valuation is a tool to enable investors to make investment decisions but, is not an exact and/or a precise science. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investments mentioned in this report.
Other Disclosures pertaining to distribution of research in the United States of America
This material was produced by ARSSBL, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by Enclave Capital LLC (19 West 44th Street, Suite 1700, New York, NY 10036) and elsewhere in the world by ARSSBL or an authorized affiliate of ARSSBL (such entities and any other entity, directly or indirectly, controlled by ARSSBL, the “Affiliates”). This document does not constitute an offer of, or an invitation by or on behalf of ARSSBL or its Affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which ARSSBL or its Affiliates consider to be reliable. None of ARSSBL or its Affiliates accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.
1. ARSSBL or its Affiliates may or may not have been beneficial owners of the securities mentioned in this report.
2. ARSSBL or its affiliates may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months.
3. ARSSBL or its affiliates may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and do not expect to receive compensation for investment banking services from the issuer of these securities within the next three months.
4. However, one or more of ARSSBL or its Affiliates may, from time to time, have a long or short position in any of the securities mentioned herein and may buy or sell those securities or options thereon, either on their own account or on behalf of their clients.
5. As of the publication of this report, ARSSBL does not make a market in the subject securities.
6. ARSSBL or its Affiliates may or may not, to the extent permitted by law, act upon or use the above material or the conclusions stated above, or the research or analysis on which they are based before the material is published to recipients and from time to time, provide investment banking, investment management or other services for or solicit to seek to obtain investment banking, or other securities business from, any entity referred to in this report.
Enclave Capital LLC is distributing this document in the United States of America. ARSSBL accepts responsibility for its contents. Any US customer wishing to effect transactions in any securities referred to herein or options thereon should do so only by contacting a representative of Enclave Capital LLC.
Additional information on recommended securities/instruments is available on request.
Appendix Analyst Certification The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report. The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:
Ratings Guide Buy Hold Sell Large Caps (>US$1bn) >15% 5-15% <5% Mid/Small Caps (<US$1bn) >25% 5-25% <5% Anand Rathi Research Ratings Distribution (as of 1 July 2014) Buy Hold Sell Anand Rathi Research stock coverage (196) 60% 27% 13% % who are investment banking clients 4% 0% 0%
Other Disclosures This report has been issued by ARSSBL which is a SEBI regulated entity, and which is in full compliance with all rules and regulations as are applicable to its functioning and governance. The investors should note that ARSSBL is one of the companies comprising within ANAND RATHI group, and ANAND RATHI as a group consists of various companies which may include (but is not limited to) its subsidiaries, its affiliates, its group companies who may hold positions, views, stakes and may service the companies covered in this report independent of ARSSBL. Investors are cautioned to be aware that there could arise a potential conflict of interest in the views held by ARSSBL and other companies of Anand Rathi who maybe affiliated, connected or catering to the companies mentioned in the Research Report; even though, ARSSBL and Anand Rathi are fully complaint with all procedural and operational regulatory requirements. Thus, investors should not use this as a sole basis for making their investment decision and should consider the recommendations mentioned in the Research Report bearing in mind the aforementioned.
Further, the information herein has been obtained from various sources which we believe is reliable, and we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities (hereinafter referred to as “Related Investments”). ARSSBL and/or Anand Rathi may trade for their own accounts as market maker / jobber and/or arbitrageur in any securities of the companies mentioned in the Research Report or in related investments, and may be on taking a different position from the ones which haven been taken by the public orders. ARSSBL and/or Anand Rathi and its affiliates, directors, officers, and employees may have a long or short position in any securities of the companies mentioned in the Research Report or in Related Investments. ARSSBL and/or Anand Rathi, may from time to time, perform investment banking, investment management, financial advisory or any other services not explicitly mentioned herein, or solicit investment banking or other business from, any entity and/or company mentioned in this Research Report; however, the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the other companies of Anand Rathi, even though there might exist an inherent conflict of interest.
Furthermore, this Research Report is prepared for private circulation and use only. It does not have regard to the specific investment objectives, financial situation and the specific financial needs or objectives of any specific person who may receive this Research Report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this Research Report, and, should understand that statements regarding future prospects may or may not be realized, and we can not guarantee the same as analysis and valuation is a tool to enable investors to make investment decisions but, is not an exact and/or a precise science. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investments mentioned in this report.
Other Disclosures pertaining to distribution of research in the United States of America
This material was produced by ARSSBL, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by Enclave Capital LLC (19 West 44th Street, Suite 1700, New York, NY 10036) and elsewhere in the world by ARSSBL or an authorized affiliate of ARSSBL (such entities and any other entity, directly or indirectly, controlled by ARSSBL, the “Affiliates”). This document does not constitute an offer of, or an invitation by or on behalf of ARSSBL or its Affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which ARSSBL or its Affiliates consider to be reliable. None of ARSSBL or its Affiliates accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.
1. ARSSBL or its Affiliates may or may not have been beneficial owners of the securities mentioned in this report.
2. ARSSBL or its affiliates may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months.
3. ARSSBL or its affiliates may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and do not expect to receive compensation for investment banking services from the issuer of these securities within the next three months.
4. However, one or more of ARSSBL or its Affiliates may, from time to time, have a long or short position in any of the securities mentioned herein and may buy or sell those securities or options thereon, either on their own account or on behalf of their clients.
5. As of the publication of this report, ARSSBL does not make a market in the subject securities.
6. ARSSBL or its Affiliates may or may not, to the extent permitted by law, act upon or use the above material or the conclusions stated above, or the research or analysis on which they are based before the material is published to recipients and from time to time, provide investment banking, investment management or other services for or solicit to seek to obtain investment banking, or other securities business from, any entity referred to in this report.
Enclave Capital LLC is distributing this document in the United States of America. ARSSBL accepts responsibility for its contents. Any US customer wishing to effect transactions in any securities referred to herein or options thereon should do so only by contacting a representative of Enclave Capital LLC.