“In 4QFY12, standalone net sales for SSL increased by 25.7% YoY to Rs5864.7 mn, led by healthy LTL growth of 10%. The LTL growth was mainly price driven with increase in ASP by 9% and volume growth of 1%. The moderation in volume growth is mainly due to 15- 18% price increase witnessed in Apparels (contributed 58.8% and 58.7% to the topline in 4QFY12 and FY12 respectively). Gross margin declined by 20 bps YoY to 31.6%, led by extension of discounted sale by 1.5 week. For FY12, net sales increased by 16.7% YoY to Rs20877.5 mn mainly driven by rapid store expansion (opened 13 stores) and LTL growth of 7% (ASP increase of 9% and volume degrowth of 2%). EBITDA declined by 2.8% YoY to Rs363.3 mn mainly due to increase in operating expenses across the board led by full impact of opening of 6 SS stores in the 3QFY12 and part impact of opening of 2 stores in 4QFY12.”
“Overall, EBITDA margin declined by 180 bps YoY to 6.2%. For full year FY12, EBITDA declined by 6.2% YoY to Rs1427.3 mn and margin declined by 70 bps YoY to 6.8%. Rapid opening of new stores and its capitalisation led to increase in depreciation expense by 34.4% and 21.7% YoY to Rs114.7 mn and Rs377.2 mn, in 4QFY12 and FY12 respectively. Interest cost increased by 135.8% and 72.2% YoY to Rs73.8 mn and Rs250.4 mn in 4QFY12 and FY12 respectively. This is due to increase in debt led by new store capex and increase in working capital requirement. Overall, in 4QFY12 and FY12, PAT declined by 31.0% and 14.5% YoY to Rs137.4 mn and Rs642.6 mn respectively.”
“Going ahead, we expect healthy sales traction in Shoppers Stop led by gradual ramp-up of new stores and improvement in consumer sentiments based on various growth led policy actions from govt and RBI. However, operating overheads will take 18-24 months to get fully absorbed and hence will lead to subdued margins. We expect sales and EBITDA to grow at CAGR of 27.7% and 36.4% during FY12-FY14E period respectively. We expect the company to post EBITDA margin of 7.3% and 7.8% in FY12E and FY13E respectively. Overall, we expect PAT to grow at CAGR of 43.4% during FY12-FY14E. We have assumed 8 store addition each in FY13E and FY14E. Hypercity is progressing well and we expect it to breakeven at EBITDA level in next 18-24 months.”
“At CMP, the stock is trading at P/E ratio of 30.6x and 18.8x FY13E and FY14E earnings respectively. Our fair value of the stock based on SOTP methodology comes to Rs289/share. We have valued standalone SSL on DCF valuation method, 51% stake in Hypercity on FY13E EV/sales multiple of 1.0x and all equity investments on book value. We reiterate our “Neutral” rating with 31st Mar13 target of Rs289/share. Upside risk to stock price in the near term could be policy change as regards the FDI in multi-brand retail,” says Aditya Birla Money research report.
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