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Table of Content
Investment Highlights ............................................................................................................ 3
Peer Group comparison...5
Keyconcern.5
Financials.6
Charts....8
Outlook and conclusions.....9
Industry Overview...... .10
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Investment Highlights
Q1 FY10 Results Update
Pantaloon Retail (India), a part of Future Group has reported a marginal increase of
21.12% in the standalone net profit for the year ended Sep 30, 2009. During the year, the
company has reported a profit of Rs.438.2 million as against Rs.361.8 million for the year
ended Sep 30, 2008. Nstsales for the quarter is increased by 17.59% to Rs.17770.2 million
from Rs.15112.1 million same quarter, last year. However, standalone total income of the
company was at Rs 17817.4 million, a rise of 18% over the prior year period. The Basic EPS
of the company is stood at Rs.2.30 for the quarter ended Sep 2009.
Quarterly Results - Standalone (RS in mn)
As At Sep-09 Sep-08 %change
Net sales 17770.20 15112.1 17.59
Net profit 438.2 361.8 21.12
Basic EPS 2.3 2.27 1.39
Pantaloon Retail to raise Rs.500 Cr via QIP
The Company will raise Rs 500 cr. by way of private placement of shares with qualified
institutional buyers.
FIIs need to take RBI`s clearance to buy Pantaloon`s shares
The Reserve Bank of India (RBI) has notified that the aggregate share holdings in
Pantaloon Retail (India) by foreign institutional investors (FIIs) under portfolio investment
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scheme (PIS) has gone below the prescribed threshold limit stipulated under the extant
FDI Policy.
Therefore, no further purchases of equity shares of the company in the
primary/secondary markets on behalf of FIIs would be allowed without obtaining prior
clearance of RBI, apex bank.
Pantaloon Retail Mulls Acquisitions
Pantaloon Retail (India) Ltd. is looking at acquiring small foods companies in India.
Company is in talks with several small companies in the foods domain. These are Indian
companies and have a clearly demarcated role to play. With an existing supplier, the
group would already be aware of the pitfalls involved in the company. The firm plans to
more than double its private labels business in foods.
Plan of Restructuring by Hiving Off
The board of directors of Pantaloon Retail (India) Ltd. has approved the company's plan of
restructuring by hiving off Food Bazaar and Big Bazaar into a fully-owned subsidiary in
order to ensure a focused approach for future expansion and growth. Pantaloon Retail is
the flagship of the Kishore Biyani-promoted Future Group.
Capital International buys 0.69% stake in Pantaloon Retail
Capital International bought 0.69% stake in Pantaloon Retail (India) for Rs 408.27 million.
Capital International via its Emerging Markets Growth Fund Inc bought 1,091,114 shares
of Pantaloon Retail (India) at Rs 374.18 a share
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Fitch places A-(ind) rating of Pantaloon Retail on RWE
Credit rating agency, Fitch Ratings has placed India-based Pantaloon Retail (India), a
National Long-term rating of `A-(ind)` on Rating Watch Evolving (RWE). The rating action
follows the company`s plan to hive off its value retailing business (including its big bazaar,
food bazaar and other value retail formats) into a wholly-owned subsidiary of PRIL, Future
Value Retail (FVRL).
Peer Group Comparison
Name of the company CMP (Rs.)
Market
Cap.(Rs.mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend(%)
Pantaloon Retail India 383.00 72884.9 7.39 51.85 3.24 30.00
Provouge India Ltd 59.30 6914.6 2.67 22.25 1.03 15.00
Koutons Retail India 350.00 10702.2 27.47 12.75 2.52 10.00
Trent Ltd 898.00 17540.5 12.99 69.13 2.89 55.00
Key Concerns
Recession in global economy
High competition from global players
Adverse Govt. policies
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Financials Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY08 FY09 FY10E FY11E
Description 12m 12m 12m 12m
Net Sales 50489.10 63417.00 76100.40 87515.46
Other Income 37.60 60.60 169.68 186.65
Total Income 50526.70 63477.60 76270.08 87702.11
Expenditure -45883.90 -56732.60 -67729.36 -77888.76
Operating Profit 4642.80 6745.00 8540.72 9813.35
Interest -1852.70 -3182.20 -3659.53 -4025.48
Gross profit 2790.10 3562.80 4881.19 5787.87
Deprecation -833.90 -1400.50 -1820.65 -2002.72
Profit Before Tax 1956.20 2162.30 3060.54 3785.15
Tax -696.50 -756.50 -1040.58 -1286.95
Profit After Tax 1259.70 1405.80 2019.96 2498.20
Equity capital 318.60 380.60 380.60 380.60
Reserves 17515.00 22114.70 24134.66 26632.86
Face value (Rs.) 2.00 2.00 2.00 2.00
EPS 7.91 7.39 10.61 13.13
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Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) 31-Mar-09 30-Jun-09 30-Sep-09 31-Dec-09E
Description 3m 3m 3m 3m
Net sales 16420.90 16627.20 17770.20 18481.01
Other income 16.00 17.80 47.20 51.92
Total Income 16436.90 16645.00 17817.40 18532.93
Expenditure -14690.80 -14794.80 -15869.00 -16448.10
Operating profit 1746.10 1850.20 1948.40 2084.83
Interest -847.30 -909.50 -868.50 -920.61
Gross profit 898.80 940.70 1079.90 1164.22
Deprecation -368.60 -388.20 -432.80 -467.42
Profit Before Tax 530.20 552.50 647.10 696.80
Tax -186.40 -187.70 -208.90 -229.94
Profit After Tax 343.80 364.80 438.20 466.85
Equity capital 350.40 380.60 380.60 380.60
Face value (Rs.) 2.00 2.00 2.00 2.00
EPS 1.96 1.92 2.30 2.45
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Charts:
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1 Year Comparative Graph
Outlook and Conclusion
At the current market price of Rs.383.00, the stock is trading at 36.08 x FY10E and
29.17 x FY11E respectively.
Price to Book Value of the stock is expected to be at 2.97 x and 2.7 x respectively for
FY10E and FY11E.
Earning per share (EPS) of the company for the earnings for FY10E and FY11E is seen
at Rs.10.61 and Rs.13.13 respectively.
Net Sales and PAT of the company is expected to grow at a CAGR of 20% and 26%
over 2008 to 2011E respectively.
On the basis of EV/EBITDA, the stock trades at 8.53 x for FY10E and 7.43 x for FY11E.
We expect that the company will keep its growth story in the coming quarters also.
We recommend Buy in this particular scrip with a target price of Rs.440.00 for
Medium to Long term investment.
Pantaloon Retal BSE SENSEX
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with high growth rates, consumer spending has risen sharply as the youth population (more
than 33 percent of the country is below the age of 15) has seen a significant increase in its
disposable income. Consumer spending rose an impressive 75 per cent in the past four years
alone. Also, organised retail, which is pegged at around US$ 8.14 billion, is expected to grow at
a CAGR of 40 per cent to touch US$ 107 billion by 2013.
The organised retail sector, which currently accounts for around 5 per cent of the Indian retail
market, is all set to witness maximum number of large format malls and branded retail stores in
South India, followed by North, West and the East in the next two years. Tier II cities like Noida,
Amritsar, Kochi and Gurgaon, are emerging as the favoured destinations for the retail sector
with their huge growth potential.
Further, this sector is expected to invest around US$ 503.2 million in retail technology service
solutions in the current financial year. This could go further up to US$ 1.26 billion in the next
four to five years, at a CAGR of 40 per cent.
India has emerged the third most attractive market destination for apparel retailers, according
to a study by global management consulting firm AT Kearney. The Northbridge Capital report
states that apparel is the "largest organised retail category", accounting for 39 per cent of the
organised market. It is growing at the rate of 12 to 15 per cent annually. Organised apparel
retail is projected to touch US$ 200 million by 2010 from the current worth of US$ 120 million,
the report noted.
Experts agree that apparel, along with food and grocery, is leading the growth of organised
retailing in India. The results of the past quarter support these findings.
Buoyed by improved consumer spending, sales of listed retailers increased by 12 per cent in the
September 2009 quarter compared with the same period in 2008. This is higher than the 8.2
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per cent posted in the June 2009 quarter. While the previous quarter saw value retailers such
as Koutons Retail and Pantaloon leading sales recovery, this time around, sales of lifestyle and
premium retailers led the growth trend. Two out of every three retailers managed an increase
of at least 10 per cent, compared to about one in three in the June 2009 quarter.
Premium players such as Shoppers' Stop and Gitanjali Gems clocked strong growth of 11 and
31.7 per cent, respectively. Shoppers' Stop saw same-store sales growth move back into
positive territory at 1.8 per cent. Operating profit margins moved up steadily to 9.93 per cent,
almost a 122 per cent improvement since the December 2008 quarter.
Luxury Goods Retail, which currently sells its products in India under a franchiseagreement, has been allowed to directly retail Gucci products in the country. Gucci
Group NV, Netherlands is investing US$ 225,867 to pick up 51 per cent stake in the
venture.
Australia's Retail Food Group is planning to enter the Indian market in 2010. It hasambitious investment plans which aim to clock revenue of US$ 87 million from the
country within five years from start of operations. In 20 years, they expect the Indian
operations to be bigger than their Australian business.
Lifestyle International, part of the Dubai-based US$ 1.5 billion Landmark Group, plans tohave over 50 stores across India by 201213. These will include 35 Lifestyle stores for
retailing apparel, cosmetics and footwear, besides 15 Home Centres that sell home
furnishing goods.
Watch maker, Timex India, is looking at increasing its presence in the country by addinganother 52 stores by March 2011 at an investment of US$ 1.3 million taking its total
store count to 120. The company has recorded revenue of US$ 15.9 million and a net
profit of US$ 1.2 million, during the first six months of the current fiscal, ending
September 30, 2009.
Wills Lifestyle plans to expand its operations by opening 100 new stores in the nextthree years. It also plans to concentrate on online buyers.
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Pantaloon Retail India (PRIL) is planning to invest US$ 77.88 million this fiscal to add upto 2.4 million sq ft retail space at its existing operations. Pantaloon Retail is also looking
to hive off its value retail chain, Big Bazaar, into a separate subsidiary, which may
eventually go for an initial public offer (IPO). PRIL proposes to open 155 Big Bazaar
stores by 2014, increasing its total network to 275 stores.
Aditya Birla Retail which operates the More chain of supermarkets and hypermarkets isscaling up its private labels business as an independent strategic business unit (SBU) and
profit centre. This may be spun off as a separate entity as private labels business
account for over 19-20 per cent sales of More supermarkets and hypermarkets.
Policy Initiatives
100 per cent FDI is allowed in cash-and-carry wholesale formats. Franchiseearrangements are also permitted in retail trade.
51 per cent FDI is allowed in single-brand retailing.
Future Ahead
According to industry experts, the next phase of growth is expected to come from rural
markets.
According to a new market research report by RNCOS titled, 'Booming Retail Sector in India',
organised retail market in India is expected to reach US$ 50 billion by 2011.
Number of shopping malls is expected to increase at a CAGR of more than 18.9 per centfrom 2007 to 2015.
Rural market is projected to dominate the retail industry landscape in India by 2012 withtotal market share of above 50 per cent.
Organised retailing of mobile handset and accessories is expected to reach close to US$990 million by 2010.
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Driven by the expanding retail market, the third party logistics market is forecasted toreach US$ 20 billion by 2011.
________________ ____ ________________________
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This documentis provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
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Firstcall India Equity Research: Email [email protected]
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