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Higher other income, lower tax rate boost PAT
In Q3FY11 (March quarter), revenue of Pantaloon Retails (PRIL) core retail
business jumped up 17.6% Y-o-Y to INR 28.12 bn, in line with our estimate of
INR 28.5 bn. Same store sales (SSS) surged 10.3% in value retailing, 10.2% in
lifestyle retailing and 9.1% in home retailing Y-o-Y. PAT soared 34.8% Y-o-Y to
INR 505 mn (in line with our INR 475 mn estimate) on account of rise in other
income and lower tax rate (33% in Q3FY11 versus 43% in Q3FY10). Revenue
momentum tapered off during the quarter (sales increase was 26.4% for
9mFY11) following supply disruption because of strike and World Cup cricket
matches of India on weekends. Comparatively, the trend in Shoppers Stop was
superior as Q4FY11 same store sales grew 14% versus 17% in FY11.
Other expenses nip EBITDA margin; 20 bps expansion Q-o-Q
EBIDTA grew 14.0% Y-o-Y to INR 2.5 bn during the quarter though EBITDAmargin dipped 28bps Y-o-Y to 8.8%, primarily led by an increase in other
expenses (54bps). Despite a sharp increase in raw material prices of apparels in
Q3FY11, margins expanded by 20 bps Q-o-Q. Also, higher share of low-margin
food business in overall sales took a toll on margin (as highlighted in our visit
note, festivals perk up sales; valuations attractive, dated January 06, 2011).
While employee costs were flat Y-o-Y, input costs dipped 33bps Y-o-Y. Interest
cost posted a marginal rise at 8.7% Y-o-Y to INR 1.09 bn.
Expansion plans on track, add 0.68 mn sq ft
PRIL added 0.68 mn sq ft retail space during the quarter, taking total space to
14.85 mn sq ft, in-line with expectations. The company added one Pantaloons
store, one Central store, five Big Bazaar, two Food Bazaar and 28 KBs Fair Price
stores during Q3FY11. Also, one Pantaloons store, one Food Bazaar store and 9
KBs Fair Price stores were shutdown due to poor performance.
Outlook and valuations: Cash counters ringing; maintainBUY
Given PRILs focus on calibrated profitable growth, robust expansion plans and
sharp correction in stock price, we are bullish on the company. Although we are
positive on the long term story, the burgeoning debt and sluggish restructuring
pace remain key concerns. SSS growth has lagged Shoppers Stop in March
quarter and we continue to monitor it in coming quarters. The stock has
corrected significantly and offers good entry point currently, in our view. We
maintain BUY/ Sector Performer recommendation/rating on the stock.
India Equity Research | Retail Result Update
PANTALOON RETAIL
Sales slows down; low interest cost, expansion brighten horizon
May 13, 2011
Reuters: PART.BO Bloomberg: PF IN
EDELWEISS 4D RATINGS
Absolute Rating BUY
Rating Relative to Sector Performer
Risk Rating Relative to Sector Medium
Sector Relative to Market Overweight
Note:Please refer last page of the report for rating explanation
MARKET DATACMP : INR 241
52-week range (INR) : 528 / 218Share in issue (mn) : 201.1
M cap (INR bn/USD mn) : 51 /1,141
Avg. Daily Vol. BSE/NSE (000) : 374.6
SHARE HOLDING PATTERN (%)
Promoters* : 44.9
MFs, FIs & Banks : 16.7
FIIs : 24.1
Others : 14.3
* Promoters pledged shares
(% of share in issue): 11.3
PRICE PERFORMANCE (%)
Stock Nifty EW Retai
Index
1 month (14.7) (5.2) (1.0
3 months (2.8) 3.3 12.7
12 months (39.9) 6.4 4.1
Abneesh Roy
+91 22 6620 3141
Nitin Mathur
+91 22 6620 3073
Harsh Mehta
+91 22 4063 5543
Financials - Core Retail
Year to June Q3FY11 Q3FY10 % change Q2FY11 % change FY10 FY11E
Net revenues (INR mn) 28,119 23,906 17.6 27,586 1.9 89,261 109,107
EBITDA (INR mn) 2,479 2,174 14.0 2,383 4.0 8,191 9,383
Net profit (INR mn) 505 375 34.8 472 7.0 2,431 1,992
Diluted EPS (INR) 2.5 2.0 24.4 2.3 7.0 11.8 9.7
Diluted P/E (x) 20.4 24.9
EV/Sales 1.0 0.9
ROAE (%) 9.0 6.7
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RetailChart 1: Store tally surged to 721 at Q3FY11 end
Chart 2: Addition takes retail space to 14.85 mn sq ft Q3FY11 end
Chart 3: EBITDA margin contracts Y -o-Y
Source: Company, Edelweiss research
0
180
360
540
720
900
Q3FY10 Q2FY11 Q3FY11
(Nos
.)
Pantaloons BB & FB Central & Brand factory
eZone Home Town KB's Fair Price
Others
0
3
6
9
12
15
Q3FY10 Q2FY11 Q3FY11
(mnsqft)
Pantaloons BB & FB Central & Brand factory
eZone Home Town KB's Fair Price
Others
0.0
2.4
4.8
7.2
9.6
12.0
Q1FY08
Q2FY08
Q3FY08
Q4FY08
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
(%)
EBITDA margin
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Pantaloon Retail
EBIDTA margins of various formatsvalue brands (~6-8%), lifestyle brands (~12-13%)
and food format (~7-8%).
Table 1: Sales and margins across formats
Source: Company, Edelweiss research
Table 2: Gross and EBITDA margins across formats
Source: Company, Edelweiss research
Chart 4: SSS grow th trend Q3FY 11 SSS taper off
Source: Company, Edelweiss research
Revenue momentum tapered off during the quarter (sales increase was 26.4% for
9mFY11) following supply disruption because of strike and World cup cricket matches of
India on weekends. Comparatively, the trend in Shoppers Stop was superior as Q4FY11
same store sales grew 14% versus 17% in FY11.
Sales INR/sq feet Gross margins (%)
Big Bazar 8,500 20-25
Food Bazaar 14,000 15-17
Pantaloon 8,500 40-45
Central 8,200 30-35
Home Town 5,000 18-20
E-Zone 10,000 10-15
Big Bazaar + Food Bazaar 70% of sales
Pantaloon 13% of sales
Central 12% of sales
Others 5% of sales
Gross margin (%) EBITDA margin (%)
Fashion 35-40 14-15
Food 15-16 3-4
Home Electronics 10 2-3
Home Furniture 35+ 14
Home Home Fashion 35-40 15
General Merchandise
(Glasses/luggage/sports goods)30 17-18
KB Fairprice 11-12 2
(40.0)
(20.0)
0.0
20.0
40.0
60.0
Q1FY0
9
Q2FY0
9
Q3FY0
9
Q4FY0
9
Q1FY1
0
Q2FY1
0
Q3FY1
0
Q4FY1
0
Q1FY1
1
Q2FY1
1
Q3FY1
1
(%)
Value retailing Lifestyle retailing Home retailing
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RetailChart 5: Shoppers Stop sales grow thOutshines Chart 6: Shoppers StopSSS grow th superior
Source: Company, Edelweiss research
Government giving finishing touches to retail FDI policy
With elections behind us, the government is believed to be giving final touches to the
proposal of allowing FDI in multibrand retail. The government is expected to convene a
high-powered meeting on the issue with all stakeholders. Post the meeting, the proposal
will be forwarded to the Cabinet. This will be in a calibrated manner so as to avoid large-
scale protest and opposition. The final report, being prepared by the Department of
Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry,
has received the much-needed approval from all the other ministries concerned.
What could be likely riders?
The government is likely to put in a condition for foreign retailers of investing a minimum
of USD 100 mn, of which USD 50 mn will be kept aside to support back-endinfrastructure such as warehouse, cold storage and transportation, among others,
depending on the state governments' decision. Retailers will not be allowed to set up
shops in cities with a population of less than a million. The Ministry of Consumer Affairs
and Public Distribution has suggested a threshold of 49% for FDI. The Micro, Small and
Medium Enterprises Ministry are of the opinion that the government should limit FDI in
multi-brand retail to 18%.
Under the current norms, the government allows 51% FDI in single-brand retail and
100% in wholesale cash-and-carry operations; it is prohibited in multi-brand. Last year,
the government also eliminated the condition that wholesale trading made to group
companies must be utilised for internal use. However, the government has not removed
the clause that such sale of goods internally should not exceed 25% of the total turnover
of the wholesale venture.
In July 2010, the government had floated a discussion paper on opening the multi-brand
retail sector for FDI. Post which, it set up a committee under the Ministry of Consumer
Affairs and Public Distribution, with representatives from ministries of commerce and
industry, finance, agriculture and food processing industries.
0.0
7.0
14.0
21.0
28.0
35.0
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11(
Shopper's
Stop
Salesgrow
th%)
Deparment stores All formats
(5.0)
1.0
7.0
13.0
19.0
25.0
Q1FY09
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Q4FY10
Q1FY11
Q2FY11
Q3FY11
Q4FY11
(%)
SS deparment stores
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Pantaloon Retail
Other developments during Q3FY11 (June year end)
Jet Airways ties up w ith Future Group
In a bid to attract more customers and provide exclusive offers to current members, Jet
Airways has partnered with Future Group. JetPrivilege members can now earn one JPMile
for purchase of INR 100 and above at each of the EZone stores or online at
futurebazaar.com.
Future Group resolved issues relating to profit margins w ith Reckitt Benkiser
Reckitt Benckiser products had been removed from shelves in Q3FY11 after the company
shot off a mail informing the Future Group that it will slash the retailers margins. The
issue has been resolved in Q3FY11 (June year end).
Clarks sets up first India store in JV w ith Future Group
Clarks Future Footwear, a 50:50 joint venture between PRIL and UK-based footwear
company Clarks, opened its first exclusive retail store in New Delhi in Q3FY11. The joint
venture, which will import 70% of the stock from its UK facilities, is targeting sale of 1
mn pair of shoes in the first two-three years of operations in India. The balance stock will
be sourced from third-party suppliers based in Chennai to be retailed across the country.
Hero Cycles announces strategic tie-up with PRIL
The worlds largest bicycle manufacturer Hero Cycles announced a strategic tie up with
PRILs sports division. This association will enable Hero Cycles to display its merchandise
and make its new range of premium bicycles available across Planet Sports and its shop-
in-shop formats within Central, Pantaloons, Brand Factory and Sports Warehouse across
all metros and tier I cities.
Using Big Bazaarchannel to drive N ano sales
Tata Motors has tied up with the Future Group to sell the Nano in Big Bazaar outlets. This
is the first time a retail chain is selling a car in the country and market experts believe
the decision to tie up with the countrys largest retailer is a brilliant move which could
help Tata Motors push Nano sales.
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Retail Gradual restructuring underway; E-Zone to be hived off
As per the earlier communicated plans, PRIL is planning to hive off Future Capital by
September 2011 and E-Zone by July 2011. However, demerger of the insurance arm is
contingent on approval of Insurance Regulatory and Development Authority (IRDA). PRIL
has earlier completed the listing of Future Mall Management and has merged Home
Solutions Retail India (HSRIL) into itself.
Fig 1: Organisation structure
Source: Company, Edelweiss research
Pantaloon Retail India
Core Retail
Lifestyle
Pantaloons
Centrals
E-Zone
Home Town
Brand Factory
Planet Sports
Standalone
Retailing
Value Retailing
Big Bazaar
Food Bazaar
Home Bazaar
Furniture Bazaar
KBs Fair Price
Future Value Retail-A
Wholly owned subsidiarySubsidiaries
Retail and allied services
Home Solutions Retail
(66.86% stake)Only collection iretained
Future Capital Holdings
(54.75% stake)
Future Supply Chains
(94.82% stake)
Future Media
(84.24% stake)
Future Bazaar India(100% stake)
Future E-Commerce
(72% stake)
Future Agrovet
(96.16% stake)
Future Mobile and
Accessories
(100% stake)
Future Generali India Insurance(25.50% stake)
General Insurance
Future Generali India LifeInsurance (25.50% stake)
Life Insurance
Staples Future Office Products(39.56% stake)
Office products and Stationary
Talwalkar Pantaloon Fitness Pvt.
(50% stake)
Future Axicom Telecom
(50% stake)
Apollo Design and ApparelPark (39% stake)
Goldmohur Design and ApparelPark (39% stake)
Joint Venture
Speciality Retail
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Pantaloon Retail
Key management profile
According to the company, promoters on board provide strategic vision and all key
functions are now being run by professionals with relevant experience. Below is a brief
profile of key management hires.
Mr. Kishore Biyani, Group CEO, Future Group
Over 25 years of experience and has led the groups transformation from an apparel
distributor to a multi-format retail chain.
Recipient of several awards in retail and entrepreneurship.
Mr. Shailesh Haribhakti, Board Chairman , PRIL
Deputy Managing Partner of Haribhakti & Co., Chartered Accountants, and is the
only Indian member on the Standards Advisory Council of the IASB.
He also serves on boards of several reputed public companies.
Mr. Kailash Bhatia, Wholetime Director, PRIL
Has over three decades of experience in the fashion business and was the co-
founder of the ColorPlus brand.
He was earlier associated with Weekender, Arvind Mills and Mafatlal Industries.
Mr. Rakesh Biyani, Wholetime Director, PRI L
Has over two decades of experience in fashion and retail.
Currently, leads operations and expansion of the groups leading formats and is
actively involved in category management, international alliances, stores operations,
and IT.
Mr. Sanjeev Agarwal, Joint CEO, Future Value Retail
He has over 20 years of experience and prior to joining PRIL, he has worked with
Hindustan Lever, P&G, Godrej Soaps and Balsara Home Products. He completed his
engineering from Institute of Technology (Banaras Hindu University) and holds a
postgraduate diploma in management in marketing and finance from IIM (L). He
joined PRIL in April 2003 and was President, Marketing, and more recently, CEO,
Pantaloons.
Mr. Sadashiv Nayak, Joint CEO, Future Value Retail
Mr. Nayak has over 14 years of experience and has previously worked with
Hindustan Lever and Asian Paints. He holds a bachelors degree in engineering from
KREC, Surathkal, and an MBA in Marketing from XLRI, Jamshedpur. He is
responsible for the P/L and operations of South and East zones and managing and
growing independent Food Bazaar stores. He joined PRIL in July 2004 and was the
Zonal Head, West Zone and CEO, Big Bazaar.
Mr. Vishnu P rasad, CEO, Centra l &Brand Factor y
Mr. Prasad holds a bachelors degree in commerce from Nagarjuna University and is
an MBA in Marketing from Pune University. He joined the company in March 2001
and has 26 years of experience. Prior to joining the company, he worked with Arvind
Mills.
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RetailMr. C.P. Toshniw al, CFO, PRI L
He has over 15 years of work experience in various companies. He is a qualified CA
and Company Secretary.
Mr. Anshuman Singh, MD & CEO, FSCS
Mr. Singh is a mechanical engineer and MBA and has over 17 years professional
experience and has successfully created and led organizations in the field of retail as
well as supply chain and logistics. Prior to his current assignment, he was the
Director and CEO of Welspun Retail. Mr. Singh has earlier worked in various
organizations of repute like Grasim, H&R Johnson and Bombay Dyeing.
Ms. Vibha Rishi: Group Strategy and Consumer Director, Future Group
Ms. Rishi has nearly 20 years of experience in the field of marketing. She leads all
marketing, communication and customer strategy for the Future Group. She began
her career with Tata Administrative Services and later joined the start-up team of
PepsiCo, India, in 1989. She spent over 17 years with the company in India and
overseas and has served at various senior management roles. She left as Vice
President, Innovation, PepsiCo International, UK. She is an alumnus of the Faculty ofManagement Studies, University of Delhi.
Mr. Damodar Mall: Director, Integrated Food Strategy, Future Group
With over two decades of experience in FMCG and food industry, Mr. Mall was the
co-founder of DMart, a supermarket chain in Mumbai, and was associated with
Hindustan Uniliver for over 12 years. He is an alumnus of Indian IIT (Mumbai) and
IIM (Bangalore).
Mr. Santosh Desai: MD & CEO, Future Brands India
Mr. Desai has over 21 years of experience in advertising. He was the President of
McCann-Erickson, India, prior to his association with the Future Group. He has been
invited as a key note speaker at advertising forums in India and overseas and hasaddressed the global management boards of several multinationals including
Hersheys, Microsoft, Philips, Unilever, Coke etc. Mr. Desai is an alumnus of IIM
Ahmedabad.
Mr. Devdutt Pattanaik: Chief Belief Officer , Future Group
Mr. Pattanaik is a medical doctor by education, a leadership consultant by profession
and a mythologist by passion. He has 14 years experience in the health care
industry with organizations such as Sanofi Aventis and Apollo Healthcare. He has
written and lectured extensively on the nature of sacred stories, symbols and rituals
and their relevance in modern times.
Mr. B Anand: Director Fi nance, Future Group
Mr. Anand has nearly 22 years of experience in corporate finance and banking
across diversified business groups. Prior to joining the group, he was President-
Corporate Finance, Vedanta Resources Group. He has been associated with Motorola
India, Credit Lyonnais, HSBC, IL&FS, Citibank etc. Mr. Anand holds a degree in
commerce and is a qualified Chartered Accountant.
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Pantaloon Retail
* FY10 Nos represent core retail business (PRIL+ FVRL)
Financial snapshot (Core Retail) (INR mn)
Year to June Q3FY11 Q3FY10 % change Q2FY11 % change FY10 FY11E FY12E
Net revenues 28,119 23,906 17.6 27,586 1.9 89,261 109,107 134,188
Raw material costs 20,064 17,137 17.1 19,652 2.1 63,056 77,466 95,139
Employee costs 1,215 1,018 19.4 1,217 (0.1) 3,940 4,910 6,173
Other expense 4,361 3,578 21.9 4,334 0.6 14,074 17,348 21,269
Total operating expenditure 25,641 21,732 18.0 25,202 1.7 81,070 99,724 122,581
EBITDA 2,479 2,174 14.0 2,383 4.0 8,191 9,383 11,607
Depreciation 660 518 27.4 650 1.4 2,123 2,514 2,932
EBIT 1,819 1,656 9.9 1,733 5.0 6,068 6,869 8,675
Other income 34 16 113.3 52 (35.7) 857 239 266
PBIT 1,853 1,671 10.9 1,785 3.8 6,925 7,108 8,941
Interest 1,096 1,008 8.7 1,078 1.7 3,913 4,134 4,652
PBT 757 663 14.2 708 7.0 3,013 2,974 4,289
Tax 252 288 (12.7) 235 7.0 582 981 1,415
Core PAT 505 375 34.8 472 7.0 2,431 1,992 2,874
Extraordinary Items - - - (129) - -
PAT 505 375 34.8 472 7.0 2,302 1,992 2,874
EPS 2.5 2.0 24.4 2.3 7.0 11.8 9.7 13.9
No. of shares ( mn) 206 190 8.3 206 - 206 206 206
Raw material costs. 71.4 71.7 (33) 71.2 70.6 71.0 70.9
Employee costs. 4.3 4.3 6 4.4 4.4 4.5 4.6
Other expenses 15.5 15.0 54 15.7 15.8 15.9 15.9
Total operating expenditure 91.2 90.9 28 91.4 90.8 91.4 91.4
EBITDA 8.8 9.1 (28) 8.6 9.2 8.6 8.7
PBT 2.7 2.8 2.6 3.4 2.7 3.2
Core profit 1.8 1.6 1.7 2.7 1.8 2.1
Tax rate 33.2 43.4 33.2 19.3 33.0 33.0
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Retail Company Description
PRIL is a leading Indian retail company with presence across most sectors of organized
retail. The company, entered modern retail in 1997 with the opening of its department
store format Pantaloons. In 2001, PRIL launched Big Bazaar, a hypermarket chain,
followed by Food Bazaar, a supermarket chain. A five format company, two years back,
it now operates over 20 formats which include Central (seamless malls located in city
centers), Collection I (home improvement products), Depot (books, music, gifts and
stationeries), aLL (fashion apparel for plus-size individuals), Shoe Factory (footwear),
and Blue Sky (fashion accessories). It has recently launched its e-tailing venture,
futurebazaar.com.
Investment Theme
The Indian retail landscape is evolving with interplay of several demographic and
economic factors. Despite the slowdown expected in real GDP growth in the near term,
the long term prospects backed by changing consumer behaviour in favour of larger
discretionary spend, has set the stage for a healthy growth in the retail space over the
next five years. The big opportunity lies in the growing share of organised retail with the
growing trend among consumers to allocate a larger share of income to consumption and
gradual improvement in lifestyle.
PRIL has established strong presence across multiple consumption categories in a bid to
capture maximum consumer wallet share. It has also successfully incubated allied
businesses derived from the retail business or which support the core retail business in
subsidiaries like Future Media, Future Logistics, Future Bazaar, Future Capital Holding
(FCH), Future Ventures, and Future Knowledge Services. We believe PRIL has the ability
to create significant value with its large scale of operations and proven execution track
record.
Key Risks
Slow revenue growth due to rollout delays and poor same store grow th
A large number of retailers are facing delays in roll outs due to delays by developers.
This is a significant risk and can lead to cost overruns. The delays on account of other
retailers could also impact PRIL as malls will not be viable unless all tenants are tied in.
The companys same store sales as a whole have been falling steadily due to rising
competition. Continued sharp decline in the same in the future will be a risk to the
companys growth.
Pressure on margins due to competition
With increasing competition, catchment areas are shrinking and the PSFPAs are not
scaling up as expected. Coupled with this, the shortage of quality retail space leading to
spiraling rentals, underdeveloped supply chain, and rising employee costs, which could
add to the cost and impact the companys margins.
Macro slowdow n
Macro concerns could hamper domestic consumption trends and result in lower footfalls.
Rising share of debt
Going forward, the company will have to depend primarily on debt for funding growth.
Steep increase in cost of borrowing can impact the profitability of the company.
.
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Financial Statements
* Income Statement represents core retail business (PRIL+ FVRL) and Balance Sheet represents consolidated nos.
Income statement (INR mn)
Year to June FY09 FY10* FY11E* FY12E* FY13E*
Net revenues 63,417 89,261 109,107 134,188 164,875
Cost of materials 44,300 63,056 77,466 95,139 116,896
Gross profit 19,118 26,205 31,641 39,049 47,979
Employee costs 2,743 3,940 4,910 6,173 7,584
Advertisement & sales costs 1,142 1,696 2,182 2,617 3,297
Electricity expenses 990 1,562 2,073 2,550 3,133
Rent and lease expenses 5,066 7,141 8,729 10,601 13,025
Others 2,493 3,675 4,364 5,502 6,595
EBITDA 6,684 8,191 9,383 11,607 14,344
Depreciation 1,401 2,123 2,514 2,932 3,422
EBIT 5,283 6,068 6,869 8,675 10,923
Other income 61 857 239 266 275
EBIT incl. other income 5,344 6,925 7,108 8,941 11,198
Net interest & Finance charges 3,182 3,913 4,134 4,652 5,147
PBT 2,162 3,013 2,974 4,289 6,050
Provision for taxation 757 582 981 1,415 1,997
Core PAT 1,405 2,431 1,992 2,874 4,054
Extraordinary items (net of tax) 0 (129) 0 0 0
Profit after tax after Minority Interest & Associate 1,405 2,302 1,992 2,874 4,054
Equity shares outstanding (mn) 190 206 206 206 206
EPS (INR) basic 7.4 11.8 9.7 13.9 19.7
Diluted shares (mn) 190 206 206 206 206
EPS (INR) fully diluted 7.4 11.8 9.7 13.9 19.7
CEPS (INR) 10.8 19.3 17.1 21.3 26.6
DPS 1 1 1 2 3
Dividend payout ratio (%) 11.1 12.8 13.0 13.0 13.0
Common size metrics (% )
Year to June FY09 FY10* FY11E* FY12E* FY13E*
Cost of materials 69.9 70.6 71.0 70.9 70.9
Employee costs 4.3 4.4 4.5 4.6 4.6
Advertising & sales costs 1.8 1.9 2.0 2.0 2.0
Electricity expenses 1.6 1.8 1.9 1.9 1.9
Rent and lease expenses 8.0 8.0 8.0 7.9 7.9
Other general expenditure 3.9 4.1 4.0 4.1 4.0
Depreciation 2.2 2.4 2.3 2.2 2.1
Net interest expenditure 5.0 4.4 3.8 3.5 3.1
EBITDA margin 10.5 9.2 8.6 8.7 8.7
EBIT margin 8.3 6.8 6.3 6.5 6.6Net profit margin 2.2 2.7 1.8 2.1 2.5
Growth metrics (% )
Year to June FY09 FY10* FY11E* FY12E* FY13E*
Revenues 25.6 40.8 22.2 23.0 22.9
EBITDA 45.1 22.6 14.6 23.7 23.6
PBT 10.5 39.4 (1.3) 44.2 41.1
Net profit 11.5 73.0 (18.0) 44.2 41.1
EPS (6.6) 59.7 (18.0) 44.2 41.1
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Retail
* Income Statement represents core retail business (PRIL+ FVRL) and Balance Sheet represents consolidated nos.
Balance sheet (INR mn)
As on 30th June FY09 FY10* FY11E* FY12E* FY13E*
Share capital 1,076 1,108 1,108 1,108 1,108
Reserves 23,947 27,656 29,390 31,890 35,417
Shareholders' funds 25,023 28,764 30,497 32,997 36,524
Minority 3,846 3,183 3,183 3,183 3,183
Secured loans 32,860 32,571 20,934 22,059 22,959
Unsecured loans 5,723 10,949 25,586 26,961 28,061
Borrowings 38,583 43,520 46,520 49,020 51,020
Deferred tax liability 40 1,102 1,102 1,102 1,102
Sources of funds 67,491 76,569 81,302 86,302 91,829
Gross block 25,945 30,868 36,179 42,021 48,021
Less depreciation 3,936 4,400 6,914 9,847 13,268
Net fixed assets 22,009 26,468 29,265 32,174 34,753
Capital work in progress 4,297 3,044 3,044 3,044 3,044
Investments 8,978 9,098 9,098 9,098 9,098
Current assets 46,231 58,467 61,160 67,975 76,707
Inventories 21,913 24,912 28,588 35,123 43,109
Sundry debtors 3,066 3,914 4,236 5,173 6,311
Cash and bank balance 2,025 2,865 1,560 902 510
Other current asset 122 157 157 157 157
Loans and advances 19,106 26,620 26,620 26,620 26,620
Current liabilities 14,049 20,508 21,264 25,988 31,772
Liabilities 13,519 19,706 20,463 25,186 30,971
Provisions 530 802 802 802 802
Working capital 32,182 37,959 39,896 41,987 44,935
Misc expenditure 25 0 0 0 0
Uses of funds 67,491 76,569 81,302 86,302 91,829
BV (INR) 131 140 148 160 177
Free cash flow (INR mn)Year to June FY09 FY10* FY11E* FY12E* FY13E*
Net profit 1,405 2,302 1,992 2,874 4,054
Add: Non cash charge 4,583 6,165 6,649 7,585 8,569
Depreciation 1,401 2,123 2,514 2,932 3,422
Others 3,182 4,042 4,134 4,652 5,147
Gross cash flow 5,988 8,467 8,641 10,458 12,622
Less:Changes in WC (2,405) 2,339 (3,241) (2,748) (3,341)
Cash from operations 3,583 10,806 5,400 7,710 9,282
Less: Capex 7,135 4,923 5,311 5,842 6,000
Free cash flow (3,552) 5,883 89 1,868 3,282
Cash flow metricYear to June FY09 FY10* FY11E* FY12E* FY13E*
Operating cash flow (1,726) 2,512 5,400 7,710 9,282
Financing cash flow 9,630 2,806 (1,393) (2,526) (3,674)
Investing cash flow (9,532) (4,479) (5,311) (5,842) (6,000)
Change in cash (1,628) 839 (1,305) (658) (392)
Capex (7,135) (4,923) (5,311) (5,842) (6,000)
Dividends paid (156) (296) (259) (374) (527)
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13
Pantaloon Retail
* Income Statement represents core retail business (PRIL+ FVRL) and Balance Sheet represents consolidated nos.
Ratios
Year to June FY09 FY10* FY11E* FY12E* FY13E*
ROAE (%) 5.9 9.0 6.7 9.1 11.7
ROACE (%) 10.0 9.6 9.8 11.6 13.7
Debtor days 17 14 14 14 14
Inventory days 114 96 96 96 95
Payable days 81 75 75 75 75
Cash conversion cycle (days) 51 35 35 35 34
Current ratio 3.3 2.9 2.9 2.6 2.4
Debt/EBITDA 5.8 5.3 5.0 4.2 3.6
Debt/Equity 1.5 1.5 1.5 1.5 1.4
Adjusted debt/equity 1.5 1.5 1.5 1.5 1.4
Interest coverage (x) 1.7 1.6 1.7 1.9 2.1
Operating ratios
Year to March FY09 FY10* FY11E* FY12E* FY13E*
Total asset turnover 1.0 1.2 1.4 1.6 1.9
Fixed asset turnover 3.3 3.7 3.9 4.4 4.9
Equity turnover 2.7 3.3 3.7 4.2 4.7
Du pont analysis
Year to March FY09 FY10* FY11E* FY12E* FY13E*
NP margin (%) 2.2 2.7 1.8 2.1 2.5
Total assets turnover 1.0 1.2 1.4 1.6 1.9
Leverage multiplier 2.6 2.7 2.7 2.6 2.6
ROAE (%) 5.9 9.0 6.7 9.1 11.7
Valuation parameters
Year to June FY09 FY10* FY11E* FY12E* FY13E*
Diluted EPS (INR) 7.4 11.8 9.7 13.9 19.7
Y-o-Y growth (%) (6.6) 59.7 (18.0) 44.2 41.1CEPS (INR) 10.8 19.3 17.1 21.3 26.6
Diluted P/E (x) 32.6 20.4 24.9 17.3 12.3
Price/BV (x) 1.8 1.7 1.6 1.5 1.4
EV/Sales (x) 1.3 1.0 0.9 0.7 0.6
EV/EBITDA (x) 12.3 11.0 10.1 8.4 7.0
Dividend yield (%) 0.3 0.6 0.5 0.8 1.1
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14 Edelweiss Securities Limited
Retail
Company Absolute
reco
Relative
reco
Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
Pantaloon Retail BUY SP M Shoppers Stop BUY SP M
Titan Industries BUY SO L
RATING & INTERPRETATION
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Ratings CriteriaSector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe
within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
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Edelweiss Securities Limited
Pantaloon Retail
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai 400 098.Board: (91-22) 4009 4400, Email: [email protected]
Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206
Nischal Maheshwari Head Research [email protected] +91 22 6623 3411
Cove r age g r oup ( s ) o f s t ocks by p r im a r y ana lys t ( s ) : Reta i l
Pantaloon Retail, Shoppers Stop, S Kumars Nationwide, Titan Industries
Distribution of Ratings / Market Cap
Edelweiss Research Coverage Universe
Rating Distribution* 118 51 17 189* 3 stocks under review
Market Cap (INR) 111 61 17
> 50bn Between 10bn and 50 bn < 10bn
Date Company Title Price (INR) Recos
Buy Hold Reduce Total
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