Shoppers Stop - ‘Intune’, The Only Exciting Thing To Watch Out For: HDFC Securities

HDFC Securities Institutional Equities

If one zooms out and assesses Shoppers Stop Ltd.’s historical performance; it’s been among the weaker retailers in our apparel retail pack. Its decadal revenue compound annual growth rate of ~6% is largely premiumisation-led with no volume (bill cut) growth to speak of. This is despite it scaling its Beauty segment during this phase.

Capital allocation has historically been poor (despite a negative working capital cycle, cash generation just about covered capital needs; money raised has primarily been used to pare debt over FY17-23).

Intune (value fashion) offers some glimmer of hope to resurrect fortunes in terms of growth and return profile. However, execution is key (upside baked in already). We build in revenue/profit before tax CAGR (FY23-26) of 13/12% respectively and have a discounted cash flow-based target price of Rs 600/share., implying 39 times price/earning 18 times enterprise valeu/Ebitda (FY26) respectively.

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