â??For 1QFY13, standalone net sales for SSL increased by 13.6% YoY to Rs4826.5 mn, led by subdued SSS growth of 1%. The SSS growth was mainly price driven with increase in ASP by 5%, partially offset by volume degrowth of 4%. The moderation in volume growth is mainly due to decline in discretionary spends led by bad consumer sentiments and persistently high inflationary scenario. Zonewise, there has been very different picture on SSS growth front, with East zone at 15%, North at 13%, South at 2% and the lowest being in West, with degrowth of 10%. Degrowth in West zone was due to oversupply of retail space in Pune and Mumbai. In 1QFY13, the company opened 2 new Shoppers Stop store and shut down 1 store, taking cumulative store count to 52.â??

â??EBITDA declined by 47.7% YoY to Rs137.9 mn mainly due to full loading of fixed overheads led by opening of 14 Shoppers Stop stores in the last 15 months. Employee cost, Rent, Electricity expenses were up 23.6%, 20.9% and 39.2% YoY to Rs357.8 mn, Rs492.7 mn and 153.5 mn respectively. Overall, EBITDA margin declined by 334 bps YoY to 2.9%. Capitalisation of new stores led to increase in depreciation expense by 48.1% YoY to Rs120 mn. Interest cost increased by 74.5% YoY to Rs77 mn. This is due to increase in debt led by new store capex and increase in working capital requirement. Overall, in 1QFY13, Adj PAT declined by 91.6% YoY to Rs9.8 mn respectively.â??

â??Going ahead, we expect gradual revival in growth in Shoppers Stop led by ramp-up of new stores and better consumer sentiments during festival season in second half. However, operating overheads will take 12-15 months to get fully absorbed and will continue to put pressure on the margins. We expect sales and EBITDA to grow at CAGR of 23.4% and 29.3% during FY12-FY14E period respectively. We expect the company to post EBITDA margin of 6.2% and 7.5% in FY13E and FY14E respectively. Overall, we expect PAT to grow at CAGR of 36.2% during FY12-FY14E. We have assumed 8 store addition each in FY13E and FY14E.â??

â??At CMP, the stock is trading at P/E ratio of 48.0x and 24.5x FY13E and FY14E earnings respectively. Our fair value of the stock based on SOTP methodology comes to Rs260/share. We have valued standalone SSL on DCF valuation method, 51% stake in Hypercity on FY14E EV/sales multiple of 1.0x and all equity investments as on FY12 balance sheet on book value. We revised our rating to â??SELLâ?? with a rolled over Aug13 price target of Rs260/share. Upside risk to stock price in the near term could be policy change as regards the FDI in multi-brand retail,â?? says Aditya Birla Money research report. 

Public holding more than 90% in Indian cos

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