Buy Shoppers Stop; target of Rs 350

Shoppers Stop’s (SSL) Q3FY17 consolidated results were above our expectations on both revenue and profitability fronts. SSL’s Q3FY17 consolidated revenues grew 15.9% YoY to Rs 1542.7 crore led by strong growth in HyperCity stores by 21% to Rs 311.4 crore and 13% growth in departmental stores to Rs 1011.2 core. HyperCity recorded an impressive like to like (LTL) sales growth of 9.5% whereas departmental stores registered LTL growth of 6.4%. Outlook The management is changing the product mix and rationalising space and churning lower revenue generating brands to improve the operational performance. The key parameter to watch would be an improvement in LTL sales growth and EBITDA margin improvement. We have a BUY recommendation on SSL with a target price of Rs 350 (SOTP based – 0.7x (departmental format) and 0.6x (HyperCity format) FY19E EV/sales).

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