30 January 2013
3QFY13 Results Update |
Sector: Retail
Shopper's Stop
BSE Sensex
19,991
Bloomberg
Equity Shares (m)
M.Cap. (INRb)/(USD b)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
S&P CNX
6,050
SHOP IN
82.2
34.9/0.6
494/283
-11/3/32
CMP: INR425
TP: INR400
Neutral
Financials & Valuation (INR b)
Y/E March
Sales
EBITDA
Adj. PAT
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh.(INR)
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div. Yield (%)
2013E 2014E 2015E
22.5
1.2
0.4
4.4
-43.5
82.5
5.4
6.8
15.0
96.2
5.1
30.6
0.2
26.8
1.7
0.7
8.1
84.4
89.2
9.1
10.6
15.0
52.1
4.8
20.9
0.3
31.2
2.2
1.0
11.6
42.8
98.8
11.8
13.5
15.0
36.5
4.3
16.1
0.4
Standalone results for 3QFY13 better than expected
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).
Gautam Duggad
(Gautam.Duggad@MotilalOswal.com); +9122 3982 5404
Sreekanth P V S
(Sreekanth.P@MotilalOswal.com); +9122 3029 5120
Investors are advised to refer through disclosures made at the end of the Research Report.
1

Shopper's Stop
Standalone results for 3QFY13 better than expected
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).
During the quarter, SHOP added 1
Shoppers Stop store
at Bangalore. It also opened
1
Crossword store, 3 M.A.C.
and 1
Clinique store.
Total retail space stood at 4.8msf.
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 declined 14%.
However, gross margins expanded 150bp YoY to 19.3% and store-level EBIDTA was
up 2.6x QoQ at INR20m. Despite a loss of INR72m at overall EBITDA level, LTL
EBITDA improved to INR41.6m (v/s INR38.3m in 3QFY12). Net loss was INR236m
(v/s INR209m in 2QFY13).
LTL sales up 12.5%
EBITDA margin down 70bp
Added one store during 3QFY13
LTL volumes up 4%
Source: Company, MOSL
30 January 2013
2

Shopper's Stop
Recovery in operating metrics led by strong festive season sales
Key Metrics (%)
1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13
Total Area (m sq ft)
2.5
2.6
3.0
3.1
3.2
3.3
3.3
Sales/sq ft - Shoppers Stop (INR) 1,820
2,186
1,984
1,967
1,588
2,052
2,080
Same store sales growth - Dept
7
11
-1
10
1
5
12.5
Sales growth - ALL
15
16
10
26
15
17
20
Sales growth - dept
22
22
9
27
14
16
21
LTL Sales growth > 5 yr old store
3
6
-6
4
-4
-1
5
LTL Sales growth < 5 yr old store
14
20
6
21
10
15
25
LTL Volume Growth (%)
-5
1
-9
1
-4
-4
4
Bought out
45.2
43.8
43.8
40.5
45.1
42.0
44.3
Consignment / SOR
46.9
50.0
50.0
53.9
50.4
53.9
51.9
Concession
7.9
6.2
6.2
6.2
4.5
4.2
3.8
Source: Company, MOSL
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 expanded 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 (v/s
INR38.3m in 3QFY12). Net loss was INR236m (v/s INR209m in 2QFY13).
HyperCITY has plans to reduce the share of foods and increase the share of apparel
and general merchandise so as to boost gross margin to 22-23% in the next couple
of years.
SHOP plans to add 1-2 HyperCITY stores per annum. We note that HyperCITY has
posted cash loss of INR1.78b since 1QFY11.
HyperCITY performance over the quarters (INR m)
Net Sales
Gross Profit
Gross Margin (%)
Store EBITDA
% to sales
Company EBITDA
% to sales
PAT
% to sales
LTL sales growth (%)
Stores
LTL volume Gr %
LTL EBIDTA
LTL Ticket Size Gr %
1QFY12
1,644
315
19.2
-20
-1.2
-129
-7.9
-237
-14.4
11
10
NA
NA
NA
2QFY12
1,769
358
20.2
7
0.4
-64
-3.6
-181
-10.2
8
10
4
30
10
3QFY12
1,976
389
19.7
8
0.4
-118
-5.9
-245
-12.4
12
12
18
38
13
4QFY12
1,637
346
21.1
1
0.1
-89
-5.4
-217
-13.3
6
12
-8
34
7
1QFY13 2QFY13 3QFY13
1,889
1,867
1,996
387
387
422
20.5
20.7
21.2
4
8
20
0.2
0.4
1.0
-93
-87
-72
-4.9
-4.6
-3.6
-214
-209
-236
-11.3
-11.2
-11.8
7
2
3
12
12
12
-7
-7
-14
20
30
42
4
1
1
Source: Company, MOSL
30 January 2013
3

Shopper's Stop
Revising estimates upwards; maintain Neutral
Consumer demand improved significantly in 3QFY13, led by good festive season
and uptick in consumer sentiment. Our channel checks suggest recovery carrying
over into 4Q.
SHOP has added ~20 stores in the past two years, which has impacted profit margins
given sub-par same store sales (SSS) growth excluding 3QFY13.
We revise our estimates to incorporate the better than expected 3QFY13 results.
The revision is sharp for FY13.
HyperCITY Retail remains under pressure. Though margins at gross level have
improved, LTL volumes have suffered. We believe HyperCITY will require another
couple of years for breakeven.
We expect margin recovery in FY14, driven by high single-digit LTL (7-8%) sales
growth.
Higher losses in HyperCITY and the resultant increase in debt to fund the business
will remain a drag on near-term financials.
SHOP trades at 52x FY14E EPS. Maintain
Neutral,
with a target price of INR400
(SOTP: Shoppers Stop at 20x FY15E EPS, HyperCITY at 1x FY15E sales).
30 January 2013
4

Shopper's Stop
Shopper's Stop: an investment profile
Company description
Shoppers Stop (SHOP) is one of the largest department
store chains in India, with 52 stores and retail space of
~2.5msf. The company is promoted by CL Raheja Group,
one of the largest real estate groups in the country. SHOP
has also entered specialty retail formats like Home
Furnishing (Home Stop) and Beauty (Estee Lauder and
M.A.C.). It also has presence in the high potential
Hypermarket space through its 51% subsidiary,
HyperCITY.
Key investment risks
Poor consumer sentiment resulting from economic
slowdown can impact sales growth, as had happened
in FY12.
HyperCITY incurred a loss of INR886m in FY12; it plans
to achieve breakeven in FY13 but PAT seems unlikely
before FY16.
Recent developments
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.
Its First Citizen club membership crossed 2.7m.
Key investment arguments
We believe SHOP is ideally positioned to benefit
from the uptick in consumption sentiment. The
department store format has reached critical mass
and is likely to fund its capex through internal
accruals, given its inventory-light model.
SHOP has added 14 stores in the past one year and
20 stores in the past two years, which has impacted
profit margins; recovery is likely only from FY14.
The company has presence in the high potential
Hypermarket space through its 51% subsidiary,
HyperCITY. It has 12 stores and is likely to add two
stores every year.
Valuation and view
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).
Sector view
We have a positive view on the sector. We expect
the sector to clock revenue CAGR of 20-25% over the
next five years, though near-term pressures cannot
be ruled out.
Players with a strong Hypermarket format and
presence in larger number of categories are likely to
be winners.
Comparative valuations
Shopper's
Stop
96.2
52.1
30.6
20.9
1.6
1.3
5.1
4.8
Pantaloon
Retail
21.2
17.4
6.6
6.2
0.6
0.6
1.2
1.1
Titan
27.3
21.8
18.4
11.4
1.8
1.4
12.6
9.3
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
4.4
8.1
Consensus
Forecast
5.4
9.9
Variation
(%)
-18.3
-18.5
P/E (x)
EV/EBITDA (x)
EV/Sales (x)
P/BV (x)
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
FY13
FY14
Target Price and Recommendation
Current
Price (INR)
425
Target
Price (INR)
400
Upside
(%)
-5.9
Reco.
Neutral
Stock performance (1 year)
Shareholding pattern (%)
Dec-12
Promoter
Domestic Inst
Foreign
Others
30 January 2013
67.6
10.4
9.8
12.3
Sep-12
67.6
10.4
9.5
12.5
Dec-11
67.9
7.4
11.7
13.0
5

Shopper's Stop
Financials and Valuation
30 January 2013
6

Shopper's Stop
N O T E S
30 January 2013
7

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Shopper's Stop
No
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No
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