Shoppers Stop: Buy for a target of Rs. 480
ICICI Direct, the leading research-backed brokerage, has given a target price of Rs. 480 for the retail stock. Recommended as a “buy” for 12 months, Shoppers Stop given the current price of Rs. 378.05 can yield potential gains of up to 26.97%.
|Store||Current price||Goal in 12 months|
T3FY22 results: A demand boost from the festivities and the wedding drove the business to pre-Covid levels in the quarter just ended, nearly 96% of Q3Fy20.
Company revenue edged up 34% YoY to Rs. 951.2 crores
During the period, the company achieved operational cost savings of Rs. 42 million rupees. Due to positive operating leverage, EBITDA increased 2x YoY to Rs. 183 crore.
PBT was placed at Rs. 66 crore against the loss of Rs. 28 crore in Q3FY21
The liquidity position remains fairly stable with cash and investments worth Rs. 207 crore and debt worth Rs. 194 crore (net surplus of Rs. 13 crore, D/E: 0.3x )
Advice from the brokerage on Shoppers Stop:
“The stock price has underperformed broader indices over the past five years due to weak SSSG, a slowing pace of store additions and a declining private label share. With the new management team in place, we expect the company to relaunch its revenue trajectory and margin profile. Reasonable valuations prompt us to remain positive on the stock and maintain BUY.” brokerage.
Target price and valuation: Brokerage Values Buyers stop at Rs. 480 or 8.5x FY24E EV/EBITDA
Key triggers that will determine future stock performance:
The new MD (ex-CEO of Westside) is expected to bring private label expertise and focus on improving high margin private label share (around 14% of revenue).
It embarked on healthy store addition plans with the opening of five stores in Q4FY22 and 12 in FY23E. Majority of added stores in Tier II/III cities. The capex for the same is expected to be Rs. 100 crore, to be funded mainly by internal accruals
Management expects SSSG to grow steadily by 9-11% in the near term.
Key focus on accelerating omnichannel investments with long-term goal of channel contributing 20% of sales from ca. 8%.
Increased focus on the beauty segment through the scaling of its own private label Arcelia (75+ SKUS to be launched in Q4)
About the company:
The company is one of the nation’s leading department stores that underwent several structural changes during the period to emphasize increasing its share of private label and the beauty segment.
Alternative action idea: “Besides Shoppers Stop, in our retail coverage, we also like ABFRL. ABFRL has developed a growth strategy to become an entity of approximately US$2.8 billion by FY26E, resulting in a CAGR of 15% for FY20-26E. BUY with a target price of Rs. 360,” suggests ICICI Direct.
L&T Infotech: Buy for a target of Rs. 8050
The ‘Buy’ on the IT services stock has been given for 12 months for a target of Rs. 8050, which given the current price of Rs. 6393.8, equates to a potential upside of 25.9%.
|Store||Current price||Goal in 12 months|
|L&T Info||Rs. 6393.8||Rs.8050|
T3FY22 results: Solid revenues coupled with EBIT QoQ margin expansion.
-Constant currency revenue increased 9.2% QoQ
– EBIT margin increased by 70 basis points QoQ thanks to strong revenues
– LTI added 27 logos in Q3, highest quarterly addition in many quarters
The brokerage view on L&T Info and its valuations:
L&T Info’s share price has risen approximately 10.7 times over the past five years (from around Rs 630 in January 2017 to around 6,714 levels in January 2022). We are maintaining the BUY rating on the stock. The company is valued at Rs. 8050 or 42x FY23E EPS by the brokerage.
Main triggers of future price performance:
The end-to-end solutions capability is expected to help the company achieve industry-leading growth.
Ability to win major contracts, presence in vertical niches, effective customer extraction, addition of Fortune 500 customers, and digital prowess are other key factors.
Opportunity for vendor consolidation and digital acceleration. We expect LTI to achieve 20.0% CAGR revenue growth in FY21-24E
About the company: Larsen & Toubro Infotech (LTI) provides application development, IMS and digital solutions services to the BFSI, retail, healthcare, media and high tech vertical markets. LTI has 71 Fortune-500 clients with a presence in North America and Europe LTI grew 14% CAGR in fiscal year 2018-21 with strong margins.
Alternative action idea: Outside of LTI, the brokerage is bullish on Infosys. Rising earnings forecasts encourage us to be positive on the stock. The brokerage has a BUY rating with a target price of Rs. 2300. Finally, Infosys stock was trading at Rs. 1785.7 per share on the NSE.
Stocks were selected from ICICI Direct’s brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author, and the brokerage are not responsible for any losses caused as a result of decisions based on the article. Announcements of