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    Neutral on Shoppers Stop, target price Rs 228: Motilal Oswal

    Synopsis

    According to the brokerage, the company is undertaking various cost-cutting measures, such as headcount optimization, and is also working on conserving cash flow.

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    Motilal Oswal has given a neutral rating to Shoppers Stop with a target price of Rs 228. The share price moved down by -4.03 per cent from its previous close of Rs 184.75. The last traded stock price is Rs 177.30.

    Shopper Stop’s revenues declined 10.4 per cent year on year to Rs 7.1 billion (7 per cent beat), along with a 440 bp decrease in gross margins to 39.7 per cent. This is attributed to store closures due to lockdown in the second half of Mar’20. Pre-Ind-AS 116 EBITDA turned to loss of INR170m (v/s INR441m expected profit) due to revenue decline; EBITDA margins stood at -2.4 per cent.

    Investment Rationale

    According to the brokerage, the company is undertaking various cost-cutting measures, such as headcount optimization, and is also working on conserving cash flow, including optimizing inventory levels, reducing capex, lowering discretionary investments, and transforming the cost structure. Shoppers Stop has sufficient financial arrangements to fulfill its working capital requirements. As of 15th June 2020, the company has 53 department stores, seven home stores, 61 beauty stores, and two Arcelia stores operational.

    ShopperStop-MOFSL
    Source: MOFSL

    Same shop sales growth (SSSG) stood at -16 per cent in 4QFY20, against 3.7 per cent in 4QFY19 and 1 per cent in 3QFY20, weighed by lockdown in Mar’20. For Jan/Feb’20, SSSG stood at 2.4 per cent. SSSG decline is higher for Shoppers Stop than both Westside and Pantaloons. SSSG for Westside/Pantaloons stood at -7 per cent/-12 per cent.

    Financials

    For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 724.38 crore, down -28.91 per cent from last quarter sales of Rs 1018.99 crore and down -10.86 per cent from last year's same quarter sales of Rs 812.64 crore. The company reported net profit after tax of Rs -127.22 crore in the latest quarter.

    Promoter/FII Holdings

    Promoters held 63.86 per cent stake in the company as of March 31, 2020, while FIIs held 6.96 per cent, DIIs 21.13 per cent and public and other 8.05 per cent.



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    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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