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Edelweiss Research is also available on www.edelresearch.com,
Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
Edelweiss Securities Limited
We met Mr. C.P. Toshniwal, CFO, Pantaloon Retail (PRIL), in the backdrop
of the company recently cracking significant back-to-back deals to cut its
burgeoning debt. These steps will trim the company’s interest
expenditure and more such deleveraging exercises are on the cards as
lowering debt is the company’s prime priority currently. However, our
key concerns on slow SS growth (compared to peers like Shoppers Stop),
sale of higher margin ‘Pantaloon format’, high attrition in top
management and higher inventory days remain. Maintain ‘HOLD’.
Business realignment to rake in moolah, trim debt
PRIL has penned deals with Bennett Coleman (INR2bn has already come), ABNL
(INR8bn to come in June, further INR8bn debt to be carved off post demerger) and
Cloverdell Investment (INR4.2bn will flow in by June end) to cut its burgeoning debt.
We expect these deals to reduce core retail debt to ~INR33bn (from INR55bn) over
coming quarters. Also, on cards is divestment of stake (in part or full) in Staples Future
Office Products, Future Supply Chain, e-Zone, Home Town and Insurance business.
Private brands, food and customer loyalty programmes on focus
The company has significant private brands contribution coming from Fashion at Big
Bazaar (80% plus), Central and Brand Factory (30%) excluding its Pantaloons format.
Margin within the foods business is likely to improve as PRIL undertakes backward
integration. The company also plans to increase its ‘payback’ members from the
current ~5mn to ~10mn by March 2013 to drive growth even during slowdown. PRIL
will continue to expand at 1.5mn sq ft per annum (2mn plus earlier run rate/guidance).
Outlook and valuations: Cautious; maintain ‘HOLD’
We are enthused by the pick-up in deleveraging steps by PRIL. The company now
needs to refocus on its core retail business so that it can address slow SSG and get
better control on inventory and cash flow. The stock is trading at 24.2x and 17.6x
FY13E and FY14E EPS, respectively. We recommend ‘HOLD’ and rate it ‘Sector
Underperformer’ on relative return basis.
VISIT NOTE
PANTALOON RETAIL Finding its way out of debt trap
EDELWEISS 4D RATINGS
Absolute Rating HOLD
Rating Relative to Sector Underperformer
Risk Rating Relative to Sector High
Sector Relative to Market Equalweight
MARKET DATA (R: PART.BO, B: PF IN)
CMP : INR 165
Target Price : INR 190
52-week range (INR) : 364 / 124
Share in issue (mn) : 217.0
M cap (INR bn/USD mn) : 39 / 706
Avg. Daily Vol.BSE/NSE(‘000) : 3,746.0
SHARE HOLDING PATTERN (%)
* Promoters pledged shares
(% of share in issue)
: 30.1
PRICE PERFORMANCE (%)
Stock Nifty
EW Retail
Index
1 month 7.6 2.5 (5.0)
3 months 0.8 (5.2) (10.3)
12 months (43.3) (7.9) (21.1)
Abneesh Roy
+91 22 6620 3141
Hemang Gandhi
+91 22 6620 3148
Pooja Lath
+91 22 6620 3075
India Equity Research| Retail
June 14, 2012
Promoters*
44.7%
MFs, FIs &
Banks
14.3%
FIIs
23.0%
Others
17.9%
Financials
Year to June FY11 FY12E FY13E FY14E
Revenues (INR mn) 110,123 120,689 117,779 130,663
Rev. growth (%) 23.4 9.6 (2.4) 10.9
EBITDA (INR mn) 9,600 10,729 10,671 11,890
Net profit (INR mn) 1,897 895 1,481 2,030
Shares outstanding (mn) 217 217 217 217
Diluted EPS (INR) 8.7 4.1 6.8 9.4
EPS growth (%) (25.9) (52.8) 65.5 37.0
Diluted P/E (x) 18.9 40.0 24.2 17.6
EV/EBITDA (x) 11.3 10.8 7.4 7.0
ROAE (%) 6.3 2.8 3.8 4.3
* Nos represent core retail business (PRIL+ FVRL)
Retail
2 Edelweiss Securities Limited
Business realignment to rake in moolah, reduce debt
PRIL is uncomfortable with the current debt level and is looking to trim it. The company may
compromise on growth, but lowering debt is of prime importance. In the quarter ending
March, PRIL paid over 90% of its EBIT as interest expense in its core retail business, leading
to profit declining 76.2% YoY. Since then PRIL has inked a few deals and is in the process of
monetising other non-core assets to trim its burgeoning debt. We expect the core retail
debt to reduce to ~INR33bn (from INR55bn) over the coming quarters.
Deals already cracked:
Offloaded controlling stake in Pantaloon format to Aditya Birla Nuvo (ABNL)
PRIL offloaded its majority stake in Pantaloons (retail and factory outlet formats) to ABNL by
issuing debentures worth INR8bn. This money will be realised in June 2012. The company
will then demerge its Pantaloons format business through a court scheme of arrangement
transfer the net assets of its business, its apportioned debt of INR8bn (thereby reducing
debt of PRIL by further INR8bn) and debentures of INR8bn to the resulting entity. On
completion of demerger (post 8-10 months), the debentures will convert into equity of the
demerged entity of Pantaloon format. This will ensure ABNL’s ~44% stake in the demerged
entity. ABNL plans to hike its stake to 50.01% via an open offer. Thereby, the resulting entity
will become ABNL’s subsidiary. Existing PRIL shareholders will continue to own shares in the
demerged entity.
Thus, post demerger, PRIL’s total debt will reduce by INR16bn (INR8bn debt will be moved
to demerged entity’s books and INR8bn consideration paid by ABNL will be used to reduce
the debt).
INR2bn raised from Bennett Coleman
With focus on paring debt, PRIL raised INR2bn by issuing 8.16mn shares to Bennett Coleman
(BCCL) at INR245 on preferential basis. Post this transaction, BCCL's stake in the company
has risen from 2.12% to 5.8%.
Sale of Future Capital Holdings in two tranches to Warburg Pincus
PRIL has announced sale of 53.67% stake in Future Capital Holdings (through its subsidiary
Future Value Retail) in two tranches to Cloverdell Investment Ltd (one of the affiliated entity
Warburg Pincus). In the first tranche, PRIL will sell 40% of its stake at INR162/share
(consideration of INR4,198mn which will flow in by mid-May when open offer is
announced), and will continue to hold 13.67% in FCH, which it is likely to offload in the open
offer. This stake will be offloaded depending on the gap between the open offer made and
the extent to which it is subscribed. This will attract capital inflow of ~INR1,400mn,
depending on the stake sold. The deal will cut debt of the consolidated entity by INR44bn
(debt in books of Future Capital). Also, the consideration received from this transaction
(~INR5,600mn) will be utilised to reduce core retail debt.
Deals in pipeline
Staples sale to infuse ~INR1,500mn
PRIL currently holds ~39.5% stake in Staples Future Office Products (SFOPPL), a joint venture
between the company and Staples Asia Investment (a subsidiary of Staples, US). It
contributes ~INR700mn to the top line (FY11 total sales=INR1,750mn; net loss=INR175mn).
PRIL will offload this stake through put option which will lead to capital inflow of ~INR1.5bn;
this deal is likely to materialise by July end.
C.P.Toshniwal, CFO
"Six months ago I said I'd be
debt free. People don't believe
that and I want to prove that I'll
be debt free. So that's a mission.
If I can build businesses, I can
reduce debt too."
- Kishore Biyani
Pantaloon Retail
3 Edelweiss Securities Limited
Insurance business deal subject to regulatory approvals
PRIL is looking to divest its stake in the insurance business subject to regulatory approvals.
It will complete the five year holding mandate in September 2012, post which it will be
permitted to sell its stake.
Future Supply Chain: Part stake sale likely
The company currently holds ~70% stake (balance ~26% held by Li & Fung) which it plans to
cut to 51%. FSC has a debt of ~INR1,250mn (sales in FY11 INR2,922mn; profit INR1.7mn).
~65% of its business is in-house (servicing PRIL logistics needs) which will fall to 50% next
year as FSC expands and PRIL consolidates. We do have a lot of non-core retail businesses.
Some of them are prime investments, which are good for exit.” – Rakesh Biyani
e-Zone and Home Town
PRIL is also looking for partners to hive off its stake in these arms.
Private brands continue to be large part of business
PRIL has significant private labels contribution coming from Fashion at Big Bazaar (FBB),
Central and Brand Factory. FBB contributes INR18bn to top line with 80% plus private
brands mix; it has 25 standalone stores and is currently at a stage where Pantaloons was 7-8
years ago. Central and Brand Factory together contribute INR22bn to the top line, with 30%
private brands mix. PRIL will continue to focus on its private brands sales post Pantaloons
sale to ABNL.
Expanding food business: Margin for improvement
Margin within the foods business is likely to improve as PRIL undertakes backward and
forward integration. For instance, in Mumbai, it bakes its own bread which has helped
improve margin (plans to replicate this bakery model in eight other cities). As margin in this
segment (currently ~4%) improves, PRIL’s overall margin will also improve. Foods business
has huge headroom for margin improvement as margin in Western countries is ~26%; can
get better with improvement in efficiencies and as scale benefits are exploited.
Customer loyalty programmes to drive growth
PRIL plans to focus on customer loyalty programmes and reduce ad spends. It has 5mn plus
customers in its payback facility (including 1.8mn Greencard Pantaloons members); 2.4mn
T-24 (Big Bazaar) card members. It hopes to cross the 10-mn mark of payback members by
March 2013.
Shoppers Stop (SSL) added 0.485mn members to the First Citizen loyalty programme in
FY12, crossing the 2.5-mn mark; members contribute significantly (70-75%) to overall
revenue. Especially during slowdown, loyal members play key sales driver insulating the
company from major impact.
Similarly, PRIL can benefit significantly from its loyalty members as it enables them to use
points earned from one format to be used across any other format.
"We do have a lot of non-core
retail businesses. Some of them
are prime investments, which
are good for exit.”
– Rakesh Biyani
"There are three kinds of
entrepreneurs - creators,
preservers and destroyers. I
consider myself to be both
creator and destroyer.
Preserving the status quo has
never been my cup of tea."
– Kishore Biyani
"Concentrate on regions, don't
spread everywhere and reduce
the number of variables. Bring
simplicity in thoughts and
business. These are my three big
advices."
– Kishore Biyani
“I think alliances, mergers,
partnerships are a way forward
and that should not be seen as
(an) exit."
– Kishore Biyani
Retail
4 Edelweiss Securities Limited
Expansion to continue at robust rate
PRIL will not let debt weigh down its expansion plans. It plans to continue its expansion
spree, though at a slower pace of 1.5mn sq ft per annum (earlier guidance of 2mn sq ft per
annum).
Rakesh Biyani: to slash costs for easing cash crunch
Rakesh Biyani, who had withdrawn into background roles a year ago when professional
members were brought to the forefront in PRIL, has been promoted from director to joint
managing director from April 1, 2012. He has been entrusted with the daunting task of
keeping costs under check to be able to service ~INR1.7bn interest expense of every
quarter.
Outlook and valuations: Positive; maintain ‘BUY’
PRIL’s key businesses are FDI ready and we expect the company to be a key beneficiary of
FDI in retail because of its enviable stature and expansion plans. Although we like its
diversified mix of retail business and size, burgeoning debt, rapid expansion and higher
inventory days remain key concerns. We are enthused by the pick-up in deleveraging steps
by PRIL. The company now needs to refocus on its core retail business so that it can address
slow SSG The stock is trading at 24.2x and 17.6x FY13E and FY14E EPS, respectively. We
recommend ‘HOLD’ and rate it ‘Sector Underperformer’ on relative return basis.
Table 1: Comparative Valuation
Source: Company, Edelweiss research
** June ending
Chart 1: Slow SSS growth across segments
Source: Company, Edelweiss research
Company Market Mcap CAGR (%)
Price (INR) (INR bn) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12-14E
Retail
Pantaloon Retail** 165 38 4.1 6.8 9.4 40.0 24.2 17.6 9.9 6.4 6.1 2.8 3.8 4.3 50.6
Shoppers' Stop 299 25 2.3 4.8 8.1 129.6 62.8 36.7 26.2 19.1 12.7 3.7 7.3 11.4 87.9
Titan Industries 214 190 6.8 7.6 9.5 31.5 28.2 22.5 20.9 18.1 14.1 48.2 39.5 37.7 18.4
Retail - Mean 67.0x 38.4x 25.6x 19.0x 14.5x 10.9x 18.2 16.9 17.8 52.3
Diluted EPS (INR) P/E( x) EV/EBITDA(x) ROE (%)
(40.0)
(20.0)
0.0
20.0
40.0
60.0
Q3
FY
09
Q4
FY
09
Q1
FY
10
Q2
FY
10
Q3
FY
10
Q4
FY
10
Q1
FY
11
Q2
FY
11
Q3
FY
11
Q4
FY
11
Q1
FY
12
Q2
FY
12
Q3
FY
12
(%)
Value retailing Lifestyle retailing Home retailing
Rakesh Biyani, Joint MD
Pantaloon Retail
5 Edelweiss Securities Limited
Chart 2: EBITDA margin expands YoY in Q3FY12E
Source: Company, Edelweiss research
Table 2: Presence across formats
Source: Company, Edelweiss research
Table 3: Retail expansion spree to continue
Source: Company, Edelweiss research
0.0
2.4
4.8
7.2
9.6
12.0
Q1
FY
10
Q2
FY
10
Q3
FY
10
Q4
FY
10
Q1
FY
11
Q2
FY
11
Q3
FY
11
Q4
FY
11
Q1
FY
12
Q2
FY
12
Q3
FY
12
(%)
EBITDA margin
Format (No. of stores) Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12
Pantaloons 48 48 53 54 59 59 64 65
BB & FB 185 191 197 204 205 198 204 204
Central & Brand factory 25 27 29 30 32 35 38 37
eZone 36 42 43 44 37 36 36 33
Home Town 10 11 11 12 11 14 15 17
KB's Fair Price 123 134 170 198 214 221 224 190
Format (sq ft area in millions) Q4FY10 Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12
Pantaloons 1.24 1.25 1.45 1.5 1.74 1.78 1.94 1.97
BB & FB 7.35 7.5 7.86 8.14 8.19 8.12 8.36 8.46
Central & Brand factory 2.18 2.2 2.36 2.52 2.76 2.77 2.97 2.88
eZone 0.48 0.53 0.53 0.54 0.47 0.43 0.42 0.38
Home Town 0.99 1.11 1.11 1.17 1.03 1.24 1.24 1.28
KB's Fair Price 0.12 0.13 0.15 0.18 0.19 0.2 0.2 0.17
Others 0.89 0.65 0.71 0.79 1.12 1.14 1.17 1.19
Retail
6 Edelweiss Securities Limited
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. PRIL has sold
its Pantaloons format to Aditya Birla Nuvo with effect from June 2012 (demerger to
complete by March 2013)
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 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 Risk
Slow revenue growth due to rollout delays and poor same store growth
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
company’s SSS growth as a whole have been falling steadily which remains key concern.
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 company’s margins.
Macro slowdown
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.
7 Edelweiss Securities Limited
Pantaloon Retail
Financial Statements
Income statement (INR mn)
Year to June FY10 FY11 FY12E FY13E FY14E
Net revenue 89,261 110,123 120,689 117,779 130,663
Materials costs 63,549 79,010 85,991 83,623 92,771
Gross profit 25,712 31,113 34,698 34,156 37,892
Employee costs 3,940 4,883 5,238 5,229 5,749
Electricity expenses 1,308 1,831 2,052 2,120 2,483
Rent and lease expenses 6,315 7,474 8,690 8,362 9,146
Other expenses 3,833 4,840 5,310 5,182 5,749
Advertisement & sales costs 2,126 2,485 2,679 2,591 2,875
EBITDA 8,191 9,600 10,729 10,671 11,890
Depreciation & Amortization 2,123 2,675 3,440 3,076 3,386
EBIT 6,068 6,925 7,289 7,595 8,504
Other income 857 208 324 301 280
EBIT incl. other income 6,925 7,133 7,613 7,896 8,784
Interest expenses 3,913 4,288 6,277 5,685 5,754
Profit before tax 3,013 2,845 1,336 2,211 3,030
Provision for tax 582 948 441 730 1,000
Core profit 2,431 1,897 895 1,481 2,030
Basic shares outstanding (mn) 206 217 217 217 217
Basic EPS (INR) 11.8 8.7 4.1 6.8 9.4
Diluted equity shares (mn) 206 217 217 217 217
Diluted EPS (INR) 11.8 8.7 4.1 6.8 9.4
CEPS (INR) 22.1 21.1 20.0 21.0 24.9
Dividend per share (INR) 1.2 0.9 0.5 0.8 1.0
Dividend payout (%) 11.0 10.7 11.0 11.0 11.0
Common size metrics - as % of net revenues
Year to June FY10 FY11 FY12E FY13E FY14E
Electricity expenses 1.5 1.7 1.7 1.8 1.9
Rent and lease expenses 7.1 6.8 7.2 7.1 7.0
Materials costs 71.2 71.7 71.3 71.0 71.0
Employee expenses 4.4 4.4 4.3 4.4 4.4
Advertising & sales costs 2.4 2.3 2.2 2.2 2.2
Other expenses 4.3 4.4 4.4 4.4 4.4
Depreciation 2.4 2.4 2.9 2.6 2.6
Interest expenditure 4.4 3.9 5.2 4.8 4.4
EBITDA margins 9.2 8.7 8.9 9.1 9.1
EBIT margins 6.8 6.3 6.0 6.4 6.5
Net profit margins 2.7 1.7 0.7 1.3 1.6
Growth ratios (%)
Year to June FY10 FY11 FY12E FY13E FY14E
Revenues 40.8 23.4 9.6 (2.4) 10.9
EBITDA 22.6 17.2 11.8 (0.5) 11.4
PBT 39.4 (5.6) (53.0) 65.5 37.0
Net profit 73.0 (22.0) (52.8) 65.5 37.0
EPS 59.7 (25.9) (52.8) 65.5 37.0
8 Edelweiss Securities Limited
Retail
Balance sheet (INR mn)
As on 30th June FY10 FY11 FY12E FY13E FY14E
Equity capital 1,108 1,818 1,818 1,834 1,834
Reserves & surplus 27,656 29,602 30,382 44,056 45,824
Shareholders funds 28,764 31,420 32,199 45,889 47,658
Minority interest (BS) 3,183 3,313 3,313 2,013 2,013
Secured loans 32,571 55,397 38,458 20,144 21,944
Unsecured loans 10,949 23,065 47,004 24,620 26,820
Borrowings 43,520 78,461 85,461 44,763 48,763
Deferred tax liability 1,102 1,555 1,555 1,555 1,555
Sources of funds 76,569 114,749 122,529 94,220 99,989
Gross block 30,868 40,260 50,260 44,376 52,376
Depreciation 4,400 6,787 10,227 13,302 16,689
Net block 26,468 33,473 40,033 31,074 35,687
Capital work in progress 3,044 3,446 3,000 2,500 2,250
Investments 9,098 12,967 12,967 12,967 12,967
Inventories 24,912 36,791 36,372 33,882 37,588
Sundry debtors 3,914 5,298 5,015 4,862 5,358
Cash and equivalents 2,865 5,520 5,267 1,767 1,529
Loans and advances 26,620 45,275 45,275 31,975 31,975
Total current assets 58,467 93,287 92,331 72,887 76,852
Sundry creditors and others 19,706 26,721 24,101 23,505 26,065
Provisions 802 1,702 1,702 1,702 1,702
Total current liabilities & provisions 20,508 28,424 25,803 25,207 27,767
Net current assets 37,959 64,863 66,528 47,680 49,085
Uses of funds 76,569 114,749 122,529 94,220 99,989
Book value per share (INR) 139.5 144.7 148.3 211.4 219.5
Free cash flow (INR mn)
Year to June FY10 FY11 FY12E FY13E FY14E
Net profit 2,302 1,897 895 1,481 2,030
Add : Non cash charge 7,328 6,964 9,717 8,761 9,140
Depreciation 2,123 2,675 3,440 3,076 3,386
Others 5,205 4,288 6,277 5,685 5,754
Gross cash flow 9,630 8,860 10,612 10,242 11,170
Less: Changes in WC (2,339) 6,248 1,918 (14,048) 1,643
Operating cash flow 11,969 2,612 8,694 24,290 9,528
Less: Capex 4,923 9,392 9,555 (6,384) 7,750
Free cash flow 7,046 (6,780) (861) 30,674 1,778
Cash flow metrics
Year to June FY10 FY11 FY12E FY13E FY14E
Operating cash flow 2,512 (10,873) 8,694 24,290 9,528
Investing cash flow (4,479) (16,687) (9,555) 16,784 (7,750)
Financing cash flow 2,806 30,216 608 (44,574) (2,015)
Net cash flow 839 2,656 (253) (3,500) (238)
Capex (4,923) (9,392) (9,555) 6,384 (7,750)
Dividends paid (296) (255) (115) (191) (261)
Share issuance/(buyback) 32 710 - 16 -
9 Edelweiss Securities Limited
Pantaloon Retail
Profitability & efficiency ratios
Year to June FY10 FY11 FY12E FY13E FY14E
ROAE (%) 9.0 6.3 2.8 3.8 4.3
ROACE (%) 9.6 8.2 6.9 8.0 10.1
Inventory day 96 102 110 105 105
Debtors days 14 15 15 15 15
Payable days 75 84 80 80 80
Cash conversion cycle (days) 35 33 45 40 40
Current ratio 2.9 3.3 3.6 2.9 2.8
Debt/EBITDA 5.3 8.2 8.0 4.2 4.1
Debt/Equity 1.5 2.5 2.7 1.0 1.0
Adjusted debt/equity 1.5 2.5 2.7 1.0 1.0
Interest coverage 1.6 1.6 1.2 1.3 1.5
Operating ratios
Year to June FY10 FY11 FY12E FY13E FY14E
Total asset turnover 1.2 1.2 1.0 1.1 1.3
Fixed asset turnover 3.7 3.7 3.3 3.3 3.9
Equity turnover 3.3 3.7 3.8 3.0 2.8
Du pont analysis
Year to June FY10 FY11 FY12E FY13E FY14E
NP margin (%) 2.7 1.7 0.7 1.3 1.6
Total assets turnover 1.2 1.2 1.0 1.1 1.3
Leverage multiplier 2.7 3.2 3.7 2.8 2.1
ROAE (%) 9.0 6.3 2.8 3.8 4.3
Valuation parameters
Year to June FY10 FY11 FY12E FY13E FY14E
Diluted EPS (INR) 11.8 8.7 4.1 6.8 9.4
Y-o-Y growth (%) 59.7 (25.9) (52.8) 65.5 37.0
CEPS (INR) 22.1 21.1 20.0 21.0 24.9
Diluted PE (x) 14.0 18.9 40.0 24.2 17.6
Price/BV (x) 1.2 1.1 1.1 0.8 0.8
EV/Sales (x) 0.8 1.0 1.0 0.7 0.6
EV/EBITDA (x) 9.1 11.3 10.8 7.4 7.0
Dividend yield (%) 0.7 0.6 0.3 0.5 0.6
*Pantaloons format to be demerged by March 2013 with retrospective effect from June 2012
10 Edelweiss Securities Limited
Company Absolute
reco
Relative
reco
Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
Pantaloon Retail HOLD SU H Shoppers Stop BUY SP L
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 Criteria
Sector 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
11 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 Co-Head Institutional Equities & Head Research [email protected] +91 22 4063 5476
Nirav Sheth Head Sales [email protected] +91 22 4040 7499
Coverage group(s) of stocks by primary analyst(s): Retail
Pantaloon Retail, Shoppers Stop, Titan Industries
Distribution of Ratings / Market Cap
Edelweiss Research Coverage Universe
Rating Distribution* 104 60 18 183
* 1 stocks under review
Market Cap (INR) 114 58 11
Date Company Title Price (INR) Recos
Recent Research
04-Jun-12 Pantaloon
Retail
A right move;
EdelFlash
139 Hold
16-May-12 Pantaloon
Retail
Burgeoning debt takes a toll;
Result Update
147 Hold
02-May-12 Shoppers
Stop
Discounting growth;
Result Update
351 Buy
> 50bn Between 10bn and 50 bn < 10bn
Buy Hold Reduce Total
Rating Interpretation
Buy appreciate more than 15% over a 12-month period
Hold appreciate up to 15% over a 12-month period
Reduce depreciate more than 5% over a 12-month period
Rating Expected to
12 Edelweiss Securities Limited
Retail
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