Shoppers Stop Ltd. share price target

SS is currently trading at P/E of 35.8x on FY26 basis. We value the stock based on P/E methodology and assign multiple of 30x on FY26E PAT of Rs 2,248mn to arrive at a target
price of Rs613 per share, which is a potential downside of 16.3% from current market price and recommend “Sell” on the stock.

Shoppers Stop (SHOP) reported 4% YoY growth in EBITDA (6% miss) in
4QFY24, as 9% YoY revenue growth was offset by inventory write-off and
GM contraction of 270bp YoY

Shoppers Stop’s (SHOP) 2QFY24 result was unimpressive. It was impacted by subdued demand, shift in festival to 3Q and higher EOSS. Revenues from private brands continue to underperform (-4% YoY; 14% revenue share) the branded business (+2% YoY). Positively, beauty segment is doing well (15% YoY).

Shoppers Stop’s (SHOP) 1QFY24 was unimpressive. It is holding fort well when faced with industry growth headwinds. That said, we expected SHOP’s private label (one of the key strategic pillar) to outperform the branded business (given ~30% lower ASP).

Shoppers Stop’s (SHOP) revenue performance has been in line with our/consensus expectations. It continues to deliver on key growth vectors (private label, beauty, loyalty programme, retail expansion, re-innovation, technology).
Highest-ever gross margin at 43% (vs 39% average for last 7 years) is
encouraging and reflective of improvement in revenue mix.

Shoppers Stop’s (SHOP) continues to deliver on all key growth vectors (private label, beauty, loyalty programme, retail expansion, re-innovation, technology). Achievement of highest-ever operating margin (at 9% - pre Ind-AS116) is encouraging.

Shoppers Stop’s (SHOP) reported revenue of Rs10bn (up 60% YoY, 7% QoQ) and EBITDA of Rs1.7bn in Q2FY23, which were above consensus estimates.

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) ecommerce initiatives. However, our revenue estimates are nearly 40% below the management...

Shoppers Stop's 3QFY22 revenue recovered to 96% of 3QFY20 (pre-COVID) level, with LTL sales estimated to be positive. However, the INR400m opex towards omni-channel has curtailed EBITDA margin to 19.2% 70bp below the pre-COVID level. Yet, the company achieved profitability in over two years and ended the quarter with a net cash position. We have raised our FY24E EBITDA by 9% building 20% growth over FY20 pre-COVID base on recent healthy recovery. Management has an ambitious target of doubling sales by FY25 from the FY20 level, which requires strong...

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New initiatives like opening of 20 smaller size stores over the next six quarters, growth in its private label mix, and increased focus on high growth beauty business offers a good growth opportunity. However, its slow growth track record in similar areas in the past and weak footfalls in the Lifestyle Apparel category makes us hawkish. We have raised our FY23E...