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Q3FY21 Company update - Shoppers Stop - ICICI Direct

Posted On: 2021-01-19 22:22:29 (Time Zone: Arizona, USA)

SSL reported better than expected revenue recovery rate to the tune of ~71% in Q3FY21 vs. our estimation of 65%. The revenue recovery rate is impressive given the fact that it lagged peers with recovery rate of mere 35% in Q2FY21. Revenue for the quarter declined by 28.8% YoY to Rs. 707.6 crore with footfalls reaching 50% of pre-covid levels vs. mere 20% in Q2FY21. Non-metro cities (Tier-II/III cites) continued to recover at a faster pace (down 23% YoY) vs. stores in metro cities (down 39% YoY). Eastern regions performed better with trends sustaining in January as well. Omni-channel strategies continue to be the key thrust with digital sales at 3x YoY and 1.75x QoQ (6% of sales, up 430 bps YoY). Deep discounting (liquidation of private label inventory) and inventory provision (Rs. 3.5 crore) resulted in gross margin contraction of 400 bps YoY to 38.6%. Quarterly cash burns declined significantly owing to cost saving initiatives (achieved ~Rs. 75 crore in Q3) with PBT losses narrowing down significantly to Rs. Rs. 27.7 crore vs. Rs. loss of Rs. 136.5 crore in Q2FY21 (PBT: Rs. 62.9 crore in Q3FY20). Going ahead, management remains cautiously optimistic on demand recovery and expects normalcy by Q2FY22E.

Valuation & Outlook

For YTDFY20, negative FCF stood at Rs. 305 crore. In a bid to strengthen the b/s, the company had proposed right issues worth Rs. 300 crore which was fully subscribed. Subsequently, company retired debt worth Rs. 125 crore and is net cash positive of Rs. 46.0 crore as on December 2020. Management expects to open 10-11 stores in FY22E, with addition of ~ 2.5 lakh sq. ft. It is also looking to shut 5-7 unviable stores in FY22E. Of the targeted Rs. 450 crore cost savings in FY21E, company has already achieved ~ Rs. 390 crore in YTDFY21. We believe certain cost rationalisation measures to be structural in nature which should aid profitability in coming years. We broadly maintain our earnings estimates for FY22/23E and expect RoCE to improve steadily to ~10% by FY23E. MD's strategic growth roadmap with improvement in key parameters like SSSG and private label share would be critical factors to watch out for. We maintain HOLD rating on the stock with a target price of Rs. 228 (7.0x FY23E EV/EBITDA).

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Shares of SHOPPERS STOP LTD. was last trading in BSE at Rs.209.8 as compared to the previous close of Rs. 206.2. The total number of shares traded during the day was 7741 in over 350 trades.

The stock hit an intraday high of Rs. 210.95 and intraday low of 205. The net turnover during the day was Rs. 1615978.

Source: Equity Bulls

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