Buy Shoppers Stop, target price Rs 740: ICICI Direct

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Buy Shoppers Stop, target price Rs 740:  ICICI Direct


ICICI Direct has buy call on with a target price of Rs 740. The current market price of Shoppers Stop is Rs 647.4. Time period given by analyst is one year when it’s price can reach defined target.

Shoppers Stop, incorporated in the year 1997, is a mid cap company (having a market cap of Rs 7051.81 crore) operating in retail sector.

It’s key products/revenue segments include Income from retailing and other operating revenue for the year ended March 31, 2022.




Financials

For the quarter ended June 30, 2022, the company has reported a consolidated total income of Rs 954 crore, up 29.84 per cent from last quarter total income of Rs 734.73 crore and up 253.99 per cent from last year same quarter total income of Rs 269.50 crore. Company has reported net profit after tax of Rs 22.83 crore in latest quarter.

The company’s top management includes Mr.B S Nagesh, Mr.Arun Sirdeshmukh, Mr.Robert Bready, Mr.Manish Chokhani, Mr.Nirvik Singh, Mr.Deepak Ghaisas, Mr.Ravi C Raheja, Mr.Neel C Raheja, Mr.Venu Nair, Ms.Christine Kasoulis. Company has SRBC & Co LLP as its auditors. As on 30-06-2022, the company has a total of 11 Crore shares outstanding.

Investment rationale
Shoppers Stop (SSL) is one of India’s leading departmental stores (90 stores) and has undergone various structural changes with focus on enhancing its share of private label brands and beauty portfolio.

The brokerage believes the new MD (former Westside CEO) would bring in his expertise in the private label brands domain and focus on improving the share of high margin private label brands (~14% of revenues).

It has embarked on a healthy store addition plans with opening of 12 stores in FY23E and steady SSSG of 9-11 per cent in the near term.

The company’s liquidity position remains fairly stable with cash & investments worth Rs 183 crore and debt worth Rs 175 crore(net surplus | 8 crore, D/E: 0.3x). With healthy store addition pipeline and sustained investments in omni-channel, they expect the revenue trajectory to further improve, going forward.

The stock price of SSL has appreciated ~55% over the last three years. SSL currently trades at reasonable valuations (~2x FY24E EV/Sales). The brokerage maintains BUY rating and ascribe value of Rs 740 (12.0x EV/EBITDA).

Promoter/FII Holdings
Promoters held 65.55 per cent stake in the company as of June 30, 2022, while FIIs owned 8.2 per cent, DIIs 18.62 per cent.

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