Motilal Oswal has given Neutral recommendation for Shoppers Stop with a target price of Rs. 400 in its research report issued on Mar 15, 2022

Motilal Oswal’s research report on Shoppers Stop

Shoppers Stop’s revenue was adversely impacted in Jan’22 due to COVID-19. However, its revenue recovered strongly and almost reached the pre-COVID levels in Feb’22; further, early trend in Mar’22 indicates the revenue scale to surpass the pre-COVID levels. According to our channel checks, the new smaller compact feature stores (of 20k-25k sqft) enjoy significantly better revenue/sqft (of ~1.5x) v/s the existing bigger stores (of 40k-50k sqft). Management targets to double revenue over the next 3-4 years backed by: a) its strategy of adding 10-12% new stores annually, b) its initiative to revive SSSG to high single or double digit on improved new store productivity and focus on private labels, c) strong growth in the Beauty segment and d) e-commerce initiatives. However, our revenue estimates are nearly 40% below the management guidance (building in FY23E revenue at 6% above FY20), which reflect in its valuation of 12x EV/EBITDA – at 40-50% discount to its peers. Even if the company achieves 60-70% of its guidance, it could significantly surprise the street expectations.

Outlook

The pace of store additions and SSSG remain the key monitorables. We maintain our Neutral rating on the stock with a TP of INR400.

More Info

At 18:30 hrs Shoppers Stop was quoting at Rs 357.10, down Rs 10.50, or 2.86 percent.

It has touched an intraday high of Rs 374.15 and an intraday low of Rs 357.10.

It was trading with volumes of 0 shares, compared to its thirty day average of 16,418 shares, a decrease of -100.00 percent.

In the previous trading session, the share closed down 1.69 percent or Rs 6.20 at Rs 361.40.

The share touched its 52-week high Rs 425.00 and 52-week low Rs 180.00 on 21 January, 2022 and 19 April, 2021, respectively.

Currently, it is trading 15.98 percent below its 52-week high and 98.39 percent above its 52-week low.

Market capitalisation stands at Rs 3,910.25 crore.

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