SSG continues to disappoint

Transcription

1 Shoppers Stop SSG continues to disappoint India Equity Research Retail February 2, 2018 Result Update Refer to important disclosures at the end of this report Emkay Your success is our success CMP Target Price Rs 526 Rs 555 ( ) as of (February 2, 2018) 12 months Rating Upside HOLD ( ) 5.5 % Results below estimates SSG at 1.4%; Revenue at Rs 9.6bn, down 5% yoy. EBITDA margins at 8.2%, up 150bps yoy, aided by improved cost control; APAT at Rs 330mn, up 73% yoy aided by lower interest and tax burden Like-to-like volumes down 0.3%; Continued correction in private labels inventory resulted in a 22% decline in sales with the mix declining by 260bps to 8.9%, the exclusive brand mix too declined 40bps yoy at 3.7% Owing to challenges from reduced GST rates impacting MRP, increased competition and mall renovations, the management has lowered their FY18E SSG guidance to 4% (vs 8%). We expect a revenue CAGR of 10% FY17-20E We have reduced our revenue estimates for FY18/19/20E by 4.4%/2.2%/2.3% and increase our EBITDA margins by 20bps/30bps/20bps on account of change in guidance and better cost control. We maintain our HOLD rating with price target of Rs 555 (14x FY20E EV/EBITDA) Results below estimates; Weak SSG mars results Shoppers Stop (SHOP) Q3FY18 results were below ours and streets estimates. Key highlights: 1) Same-store Sales Growth (SSG) at 1.4%, impacted by change in GST rates in certain items (lowering MRP) and mall renovations. Revenues at Rs 9.6bn, down 5% yoy. 2) Gross and EBITDA margins improved by 180bps and 150bps respectively to 38.6% and 8.2%. Lower other expenses helped boost EBITDA by 16% yoy to Rs 794mn. 3) APAT stood at Rs 330mn, up 73% yoy aided by lower interest and tax burden. The company reported exceptional items to the tune of Rs 166mn, on account of impairment in value of investments. Company reported a profit of Rs 163mn, down 14% yoy. Management reduces FY18E SSG guidance; Maintain HOLD Owing to challenges from reduced MRP, increased competition and mall renovations, the management has lowered their FY18E SSG guidance to 4% (vs 8%). However, cost control initiatives have started to bear fruit with EBITDA margins inching up to 8.2% during the quarter. We believe that re-jigging the private labels, improved in-store experience and digital programmes such as the omnichannel initiative should help drive footfalls and SSG in the coming quarters. The tie up with amazon and store expansion is expected to drive sales. We expect a revenue CAGR of 10% FY17-20E. We have reduced our revenue estimates for FY18/19/20E by 4.4%/2.2%/2.3% and increase our EBITDA margins by 20bps/30bps/20bps on account of change in guidance and better cost control. Reduction in debt is likely to boost our EPS estimates by 7%/7.6%/2% for FY18/19/20E. We maintain our HOLD rating with price target of Rs 555 (14x FY20E EV/EBITDA). Financial Snapshot (Standalone) (Rs mn) FY16 FY17 FY18E FY19E FY20E Revenue 33,548 36,480 37,564 43,074 48,284 EBITDA 2,046 1,925 2,239 2,851 3,439 EBITDA Margin (%) APAT ,004 1,414 EPS (Rs) EPS (% chg) 14.5 (40.4) ROE (%) P/E (x) EV/EBITDA (x) P/BV (x) Change in Estimates EPS Chg FY18E/FY19E (%) 7.1/7.6 Target Price change (%) NA Target Period (Months) 12 Previous Reco Emkay vs Consensus EPS Estimates FY18E HOLD FY19E Emkay Consensus Mean Consensus TP (12M) Rs 652 Stock Details Bloomberg Code SHOP IN Face Value (Rs) 5 Shares outstanding (mn) Week H/L 603 / 286 M Cap (Rs bn/usd bn) 46 / 0.72 Daily Avg Volume (nos.) 133,674 Daily Avg Turnover (US$ mn) 1.2 Shareholding Pattern Jan '18 Promoters 63.7% FIIs 8.0% DIIs 14.8% Public and Others 13.5% Price Performance (%) 1M 3M 6M 12M Absolute (2) (10) Rel. to Nifty (5) (13) Relative price chart Rs Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Jan-18 Source: Bloomberg This report is solely produced by Emkay Global. The following person(s) are responsible for the production of the recommendation: Sameep Kasbekar, CFA sameep.kasbekar@emkayglobal.com Shoppers Stop (LHS) Rel to Nifty (RHS) % ED: HEMANT MARADIA SA: DHANANJAY SINHA

2 Exhibit 1: Actual vs Estimates (Rs mn) Actual Estimate (Emkay) Consensus Estimate Emkay % variation Consensus Comment Revenues 9,632 10,719 10, % -8.9% Weak SSG impacts growth EBITDA % 5.8% EBITDA margin (%) 8.2% 6.9% 7.1% 1.3% 1.1% Margin boosted by lower other expenses APAT % 22.7%, Bloomberg Change in GST rates impacts SSG The overall SSG was impacted by change in GST rates in certain items that led to a lower MRP (impact on topline to the tune of 3%) and stood at 1.4%. Older stores (>5 years) reported an SSG of -2.3%, while newer stores (<5 years) reported a strong 8.5% SSG. The overall like-tolike (LTL) volumes declined by 0.3% partially impacted by renovation in malls. The average selling price improved by 1.7% yoy to Rs 1354, while the overall revenue per sqft increased by 7% to Rs 2596/sqft. Footfalls for the quarter stood at 10.8mn, down 5% yoy, however, conversion ratio and transaction size improved to 27.1% and Rs 3321 (+8.3% yoy) respectively. Continued correction in private labels inventory resulted in a 22% decline in sales with the mix declining by 260bps to 8.9%, the exclusive brand mix too declined 40bps yoy at 3.7%. Exhibit 2: Shoppers Stop SSG below expectations Exhibit 3: Private label mix down 260bps yoy 25% 20% 15% 19.8% 16% 12% 12.2% 11.5% 11.0% 12.2% 10.7% 8.9% 10% 5% 0% -5% -10% 6.4% 2.2% 1.4% Q217 Q317 Q417 Q118 Q218 Q % -5.5% 8% 4% 0% 4.0% 4.1% 4.1% 4.2% 4.0% 3.7% Q217 Q317 Q417 Q118 Q218 Q318 Shoppers Stop SSG (%) Private label mix (%) Exclusive label mix Exhibit 4: Revision in earnings estimates Y/E, Mar (Rs. mn) FY18E FY19E FY20E Earlier Revised % Change Earlier Revised % Change Earlier Revised % Change Revenues , , , EBITDA , , , EBITDA Margin (%) bps bps bps APAT , , EPS Source: Emkay Research Exhibit 5: Key growth assumptions Key Growth Assumptions FY17 FY18E FY19E FY20E Same-store Sales Growth 3.1% 4.0% 7.0% 8.0% Departmental Stores Added ED: HEMANT MARADIA SA: DHANANJAY SINHA February 2,

3 Exhibit 6: Quarterly summary - Standalone Y/E, Mar (Rs. m) Q3FY17 Q2FY18 Q3FY18 YoY (%) QoQ (%) 9MFY18 9MFY17 Gr (%) Revenue 10,112 8,376 9, ,419 27, Expenditure 9,428 7,869 8, ,818 25, Consumption of RM 6,388 5,059 5, ,971 17, as % of sales 63.2% 60.4% 61.4% 61.9% 62.6% Employee Cost ,196 2, as % of sales 6.9% 8.6% 7.9% 8.0% 7.4% Other expenditure 2,340 2,090 2, ,651 6, as % of sales 23.1% 25.0% 22.5% 24.3% 24.9% EBITDA ,601 1, Depreciation EBIT Other Income Interest PBT Total Tax Adjusted PAT (Profit)/loss from JV's/Ass/MI APAT after MI Extra ordinary items Reported PAT Adjusted EPS Margins (%) (bps) (bps) (bps) EBIDTA EBIT EBT PAT Effective Tax rate ,780-1, ,440 ED: HEMANT MARADIA SA: DHANANJAY SINHA February 2,

4 Key Financials (Standalone) Income Statement Y/E Mar (Rs mn) FY16 FY17 FY18E FY19E FY20E Revenue 33,548 36,480 37,564 43,074 48,284 Expenditure 31,502 34,555 35,325 40,223 44,846 EBITDA 2,046 1,925 2,239 2,851 3,439 Depreciation 977 1,155 1,155 1,315 1,406 EBIT 1, ,084 1,537 2,032 Other Income Interest expenses PBT ,545 2,176 Tax Extraordinary Items (238) (478) (504) 0 0 Minority Int./Income from Assoc Reported Net Income 229 (200) 75 1,004 1,414 Adjusted PAT ,004 1,414 Balance Sheet Y/E Mar (Rs mn) FY16 FY17 FY18E FY19E FY20E Equity share capital Reserves & surplus 7,369 7,190 8,963 9,888 11,214 Net worth 7,786 7,608 9,403 10,327 11,654 Minority Interest Loan Funds 5,898 5,759 4,229 3,429 2,429 Net deferred tax liability (36) (43) (43) (43) (43) Total Liabilities 13,649 13,324 14,093 14,218 14,544 Net block 6,316 6,397 6,541 6,527 5,868 Investment 4,054 4,080 4,080 4,080 4,080 Current Assets 8,421 7,712 8,668 9,545 11,227 Cash & bank balance Other Current Assets 2,732 2,742 2,818 3,232 3,623 Current liabilities & Provision 5,420 4,990 5,321 6,059 6,756 Net current assets 3,000 2,722 3,347 3,486 4,471 Misc. exp Total Assets 13,649 13,324 14,093 14,218 14,544 Cash Flow Y/E Mar (Rs mn) FY16 FY17 FY18E FY19E FY20E PBT (Ex-Other income) (NI+Dep) ,251 1,851 Other Non-Cash items Chg in working cap (350) 269 (260) (473) (448) Operating Cashflow 1,628 1,570 1,474 1,846 2,372 Capital expenditure (1,465) (1,083) (1,300) (1,300) (747) Free Cash Flow ,625 Investments 15 (26) Other Investing Cash Flow (495) (48) Investing Cashflow (1,643) (862) (1,034) (1,006) (423) Equity Capital Raised , Loans Taken / (Repaid) 717 (139) (1,530) (800) (1,000) Dividend paid (incl tax) (151) 0 (73) (80) (88) Other Financing Cash Flow (8) (143) Financing Cashflow 18 (712) (76) (1,174) (1,412) Net chg in cash 2 (4) 365 (334) 537 Opening cash position Closing cash position ED: HEMANT MARADIA SA: DHANANJAY SINHA February 2,

5 Key Ratios Profitability (%) FY16 FY17 FY18E FY19E FY20E EBITDA Margin EBIT Margin Effective Tax Rate Net Margin ROCE ROE RoIC Per Share Data (Rs) FY16 FY17 FY18E FY19E FY20E EPS CEPS BVPS DPS Valuations (x) FY16 FY17 FY18E FY19E FY20E PER P/CEPS P/BV EV / Sales EV / EBITDA Dividend Yield (%) Gearing Ratio (x) FY16 FY17 FY18E FY19E FY20E Net Debt/ Equity Net Debt/EBIDTA Working Cap Cycle (days) Growth (%) FY16 FY17 FY18E FY19E FY20E Revenue EBITDA 8.3 (5.9) EBIT 3.7 (28.0) PAT (43.8) (187.2) 0.0 1, Quarterly (Rs mn) Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Revenue 10,112 9,103 9,411 8,376 9,632 EBITDA EBITDA Margin (%) PAT 190 (361) (37) (218) 163 EPS (Rs) 2.3 (4.3) (0.4) (2.6) 2.0 Shareholding Pattern (%) Mar-17 Jun-17 Sep-17 Dec-17 Jan-18 Promoters FIIs DIIs Public and Others Source: Capitaline ED: HEMANT MARADIA SA: DHANANJAY SINHA February 2,

6 4-Feb-15 4-Aug-15 1-Feb Jul Jan Jul Jan-18 Shoppers Stop (SHOP IN) RECOMMENDATION HISTORY TABLE Date Closing Price TP Period (months) Rating Analyst 27-Oct m Hold Sameep Kasbekar 2-Aug m Hold Sameep Kasbekar 31-Jul m Hold Sameep Kasbekar 9-May m Hold Sameep Kasbekar 3-Feb m Buy Sameep Kasbekar 7-Nov m Buy Sameep Kasbekar 1-Aug m Buy Sameep Kasbekar 5-May m Buy Sameep Kasbekar 2-Feb m Buy Sameep Kasbekar 3-Nov m Accumulate Sameep Kasbekar 23-Oct m Accumulate Sameep Kasbekar 3-Aug m Accumulate Sameep Kasbekar 17-Jul m Accumulate Sameep Kasbekar 4-May m Accumulate Sameep Kasbekar 3-Feb m Accumulate Tejas Sheth RECOMMENDATION HISTORY CHART BUY Hold Sell Accumulate Reduce Price Target Price Source: Bloomberg, Company, Emkay Research ED: HEMANT MARADIA SA: DHANANJAY SINHA February 2,

7 Emkay Rating Distribution BUY Expected total return (%) (Stock price appreciation and dividend yield) of over 25% within the next months. ACCUMULATE Expected total return (%) (Stock price appreciation and dividend yield) of over 10% within the next months. HOLD Expected total return (%) (Stock price appreciation and dividend yield) of upto 10% within the next months. REDUCE Expected total return (%) (Stock price depreciation) of upto (-) 10% within the next months. SELL The stock is believed to underperform the broad market indices or its related universe within the next months. Emkay Global Financial Services Ltd. CIN - L67120MH1995PLC th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai India Tel: Fax: Web: DISCLAIMERS AND DISCLOSURES: Emkay Global Financial Services Limited (CIN-L67120MH1995PLC084899) and its affiliates are a full-service, brokerage, investment banking, investment management and financing group. 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ED: HEMANT MARADIA SA: DHANANJAY SINHA February 2,

8 Sameep Kasbekar, CFA, MSc (Finance), CFA ED: HEMANT MARADIA SA: DHANANJAY SINHA February 2,