7 November 2016
2QFY17 Results Update | Sector: Retail
Shoppers Stop
Neutral
BSE SENSEX
25,230
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm/ Vol m
Free float (%)
S&P CNX
7,747
SHOP IN
83.5
28.7 / 0.5
422 / 335
-4/-12/-14
12
32.9
CMP: INR349
TP: INR350 (0%)
Weak margin performance continues
S/L results:
Shoppers Stop’s (SHOP) sales grew 7.1% YoY (est. of +18%) to
INR9.4b (Ind-AS). On LTL basis, sales grew 2.2% (on a base of 0.1% growth) with
volumes down 3.1%. For stores less than five years/over five years old, LTL sales
grew 5.9%/0.5%. EBITDA declined 19.3% YoY (est. of +9.4%) to INR330m,
leading to adj. PAT of INR107m (-11% YoY).
Gross margin flat at 36%.
Increase in staff costs (+50bp YoY to 7.2%), lease rent
(+50bp YoY to 9.4%) and administrative expenses (+20bp YoY to 15.8%) led to
EBITDA margin contraction of 120bp YoY to 3.5% (est. of -50bp). EBITDA
declined 19.3% YoY to INR330m. Adj. PAT decline was limited to 11% YoY due to
lower depreciation and lower tax rate than expected. In 2QFY17, SHOP opened
one new store.
HyperCITY performance highlights:
HyperCITY reported sales of INR2.9b, up
15.5% YoY (LTL sales/volume growth of 3.4%/2.7%). Net margin expanded
100bp YoY to 21.2%. Store EBITDA declined to INR19m from INR55m in 2QFY16,
led by higher store operating expenses (+28.1% YoY). HyperCITY posted EBITDA
and PAT loss of INR6m and 173m, respectively.
Concall highlights:
a) FY17 target SSS of 5.5% for SHOP and 6-7% for 2HFY17; for
HyperCITY, it would be early double-digit for H2FY17. b) Started 2QFY17 (end of
season sale phase of the quarter) with double-digit LTL growth; latter part went
bad. Diwali to Diwali comparison was 8-9% LTL growth. c) Company-level
EBITDA margin guidance of 6-6.5%. d) Decent pick up in October (late single-
digit SSS growth to early double-digit); November might be a drag to 3QFY17,
while December is likely to be same as October.
Valuation and view:
Good start to the festive season will aid healthy growth in
2HFY17, but results continue to be disappointing. We cut our SSS estimate for
FY17; however, due to increase in other income, we have increased EPS by 5-6%
for FY17E/FY18E. Maintain
Neutral
with a SOTP-based TP of INR350.
Financials & Valuations (INR b)
Y/E Mar
2016 2017E 2018E
Net Sales
34.1
37.2
43.2
EBITDA
2.2
2.3
2.9
PAT
0.5
0.8
1.0
EPS (INR)
5.8
9.3
12.0
Gr. (%)
19.3
58.8
29.4
BV/Sh (INR)
95.6 107.4 119.6
RoE (%)
6.3
9.3
10.7
RoCE (%)
6.2
7.9
9.1
P/E (x)
59.8
37.6
29.1
P/BV (x)
3.6
3.2
2.9
Estimate change
TP change
Rating change
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Krishnan Sambamoorthy
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 3982 5428
Vishal Punmiya
(Vishal.Punmiya@MotilalOswal.com); +91 22 3980 4261

Shoppers Stop
Key Quarterly Charts
Exhibit 1: Quarterly Snapshot
Key metrics (%)
Total Area (m sq ft)
Sales/sq ft - Shoppers Stop (INR)
Sales growth - ALL
Sales growth - dept
Same store sales growth - Dept
LTL Sales growth > 5 yr old store
LTL Sales growth < 5 yr old store
LTL Volume Growth (%)
Bought out
Consignment / SOR
Concession
2QFY15
4.2
2,354
18.0
16.4
11.0
7.0
20.0
7.2
40.8
56.9
2.3
3QFY15
4.2
1,985
7.1
5.8
0.8
(2.7)
7.9
(1.1)
42.0
55.5
2.5
4QFY15
4.2
2,176
9.0
8.5
4.0
3.3
5.3
(1.7)
39.9
58.0
2.0
1QFY16
4.2
1,858
15.7
15.5
12.7
13.3
11.6
10.6
44.2
53.9
1.9
2QFY16
4.2
2,343
3.5
3.2
0.1
(0.4)
1.1
(1.6)
41.6
56.6
1.8
3QFY16
4.3
2,338
17.2
18.2
17.4
17.6
17.1
15.9
43.0
55.2
1.8
4QFY16
4.3
2,300
8.0
8.3
5.9
5.0
8.3
5.4
41.8
56.4
1.8
1QFY17
4.4
1,927
9.8
10.6
5.5
3.0
11.2
5.7
45.1
53.2
1.7
2QFY17
4.5
2,370
7.7
8.0
2.2
0.5
5.9
(3.1)
40.5
57.9
1.5
Source: Company, MOSL
Exhibit 2:
Shoppers Stop added 1 store in 2QFY17
Shoppers Stop
Hypercity
81 82
19 20
Exhibit 3:
LTL sales grew 2.2% in 2QFY17
LTL Sales growth (%)
15.5
12.5 12.0
10.0
5.0
5.5
11.0
8.4
3.7
0.8
4.0
0.1
12.7
5.9 5.5
2.2
17.4
54 55 55
60 61
77
73 72 73 74 76
69 72
65 67
17 17 17 17
15 15 15 15 15 16
14
12 12 12 13
Source: Company, MOSL
Source: Company, MOSL
Exhibit 4:
LTL volumes down
3.1%
LTL Volume growth (%)
15.9
9.0
4.0
1.0
3.3
(1.0)
10.6
6.5 5.4
7.2
5.4 5.7
Exhibit 5:
EBITDA
margins
contracted 120bp YoY
EBITDA Margin (%)
7.5
5.0
6.1
4.4
5.5
7.4
6.5 7.0 6.0
2.5
1.0
7.8
4.7
5.8
3.5
6.3
5.0
(4.0)
(1.1)
(1.7) (1.6)
(3.1)
Source: Company, MOSL
Source: Company, MOSL
7 November 2016
2

Shoppers Stop
Exhibit 6: LTL Customer entry grew 4.6%
LTL Customer Entry Growth (%)
5.0
1.0
(6.0)
(1.0)
5.0
(0.5)
(3.7)
(8.7)
(6.7) (6.6)
(4.1) (4.1)
(12.0)
(6.9) (6.0)
8.2
4.6
Source: MOSL, Company
Shoppers Stop: LTL sales up 2.2 % while LTL volumes down 3.1%
Sales, EBITDA and PAT growth came at 7.1%, -19.3 and -11% vs. our
expectations of 18%, 9.4% and 25.3% respectively.
SHOP’s like-to-like growth for the quarter stood at 2.2% with LTL volumes
declining 3.1%.
Gross margin remained flat for the quarter at 36%. Increase in staff costs (up
50bp YoY to 7.2%), lease rent (up 50bp YoY to 9.4%) and administrative
expenses (up 20bp YoY to 15.8%) led to EBITDA margin contraction of 120bp
YoY to 3.5% (est. 50bp contraction). EBITDA declined 19.3% to INR330m.
Adj. PAT decline was limited to 11% YoY to INR 107m due to lower depreciation
and lower tax rate than expected.
During 2QFY17; SHOP opened 1 store (Total SHOP store stands at 82). Total
retail space stood at 4.46msf.
Exhibit 7: HyperCITY Quarterly snapshot
INR m
Net Sales
Gross Profit
Gross Margin (%)
Store EBITDA
% to sales
Company EBITDA
% to sales
PAT
% to sales
LTL sales growth (%)
Stores
LTL volume Gr %
LTL Ticket Size Gr %
2QFY15
2,304
516
22.4
91
3.9
2
0.1
-164
-7.1
1.0
15
-5.0
6.0
3QFY15
2,435
552
22.7
93
3.8
2
0.1
-159
-6.5
6.5
15
-2.0
9.0
4QFY15
2,012
458
22.7
54
2.7
-65
-3.2
-252
-12.5
5.7
16
-1.0
7.0
1QFY16
2,368
536
22.6
95
4.0
1
0.0
-159
-6.7
1.9
17
-6.0
8.0
2QFY16
2,372
527
22.2
55
2.3
-41
-1.7
-207
-8.7
0.3
17
-5.0
2.0
3QFY16
2,494
566
22.7
71
2.8
(26.8)
(1.1)
-209
-8.4
-0.8
17
0.5
-1.3
4QFY16
2,112
469
22.2
(14)
(0.7)
(129.1)
(6.1)
-354
-16.7
2.1
17
4.3
-1.0
1QFY17
2,525
590
23.3
28
1.1
(90.9)
(3.6)
-257
-10.2
-0.5
19
0.3
-0.1
2QFY17
2,737
623
22.8
19
0.7
(5.6)
(0.2)
-173
-6.3
3.4
20
2.7
0.5
Source: Company, MOSL
HyperCITY: LTL volume grew 2.7%; Store level EBITDA posts marginal profit
HyperCITY reported sales of INR2.9b, up 15.5% YoY with 3.4% LTL sales growth
and 2.7% LTL volume growth. Net margin expanded 100bp to 21.2%. Store
EBITDA stood at INR19m compared to 55m in 2QFY16, owing to higher store
operating expenses (up 28.1% YoY). HyperCITY posted EBITDA and PAT loss of
INR6m and 173m. Added 1 store in 2QFY17 (Current store count 20; 1.38msf).
3
7 November 2016

Shoppers Stop
Key Concall Highlights
Highlights from SHOP’s business
Loyalty program members at 4.38m.
Disappointing quarter.
Started the quarter (End of Season Sale phase of the quarter) with double digit
LTL growth; latter part went bad. Diwali to Diwali comparison was 8-9% LTL
growth.
Decent pick in October (late single digit SSS growth to early double digit);
November might be a drag to 3QFY17 while December is likely to be same as
October. Autumn winter collection will drive 4QFY17. Winter wear 12-15% of
sales for the year on an average.
Mother care (5-6% of sales) and jewelry business dragged volumes. Non-apparel
growth largely led by cosmetics.
Omni channel will be live by 2QFY17.
>5 years is 60% of sales and <5 years will be the rest.
Gross margins affected due to schemes and promotions.
EBITDA margin: Gets impacted usually when LTL growth slips below 5.5%.
HyperCITY highlights
Fashion share up.
Increase in operating expenses was due to new store additions.
Competition from Online
Q3FY14 was the only quarter impacted by ecom. Electronics, appliances and
mobiles only impacted by ecom.
No material impact for Shoppers Stop.
GST impact
GST will be good for the company. Overall will be positive. Do not see it margin
dilutive.
Guidance
6-6.5% Company level EBITDA margin guidance.
SSS for dept stores would be 6-7% in H2; overall 5.5% for dept store for FY17.
HyperCITY SSS would be early DD for H2.
Private brands currently at 13%; plans to take it to 25% in next 3 years.
Store addition: 2 more additions by FY17 end. 1 SHOP will be shut; not yet
decided which store.
st
Fund raising: INR1.5-2b to be raised before 31 March’17. Open to all options
including strategic as well as financial.
Q3 is the most profitable quarter as it’s a full price quarter.
3-4 SHOP stores to be added a year beyond FY17; HyperCITY to be decided later;
7-8 Estee Lauder stores.
Tax rate: 38-39% for FY17.
7 November 2016
4

Shoppers Stop
Valuation and view
Good start to the festive season will aid healthy growth going forward in 2HFY17
but meanwhile results continue to be disappointing.
We cut our SSS for FY17 but due to increase in other income, EPS have actually
increased by 5-6% for FY17 /FY18. Maintain
Neutral,
with a SOTP-based target
price of INR350.
Exhibit 8: Cut our SSS for FY17 to bake in SSS miss during the quarter
New
Sales
EBITDA
PAT
FY17E
37,204
2,306
773
FY18E
43,157
2,853
1,000
FY17E
38,569
2,561
724
Old
FY18E
44,740
3,109
948
FY17E
-3.5%
-10.0%
6.7%
Change
FY18E
-3.5%
-8.2%
5.4%
Source: Company, MOSL
7 November 2016
5

Shoppers Stop
Financials and Valuations
Income Statement
Y/E March
Net Revenues
Change (%)
Total Expenditure
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Charges
Non-operational Income
Profit before Taxes
Change (%)
Margin (%)
Tax
Tax Rate (%)
Profit after Taxes
Change (%)
Margin (%)
Exceptionals
Reported PAT
2011
17,120
22.2
15,599
1,521
43.0
8.9
310
145
72
1,138
98.9
6.6
387
34.0
751
79.9
4.4
1
752
2012
19,297
12.7
17,878
1,419
-6.7
7.4
377
250
187
978
-14.0
5.1
335
34.3
643
-14.5
3.3
0
643
2013
22,542
16.8
21,278
1,264
-10.9
5.6
507
319
172
610
-37.6
2.7
211
34.6
399
-37.9
1.8
-7
392
2014
27,136
20.4
25,599
1,537
21.6
5.7
618
419
134
634
3.9
2.3
257
40.6
377
-5.6
1.4
-7
370
2015
30,420
12.1
28,531
1,889
23.0
6.2
858
512
177
696
9.8
2.3
288
41.4
407
8.1
1.3
0
407
2016
34,132
12.2
31,960
2,173
15.0
6.4
977
573
213
836
20.1
2.4
346
41.4
490
20.3
1.4
-238
252
2017E
37,204
9.0
34,898
2,306
6.1
6.2
1,048
562
570
1,267
51.6
3.4
494
39.0
773
57.7
2.1
0
773
(INR Million)
2018E
43,157
16.0
40,303
2,853
23.7
6.6
1,220
564
570
1,639
29.4
3.8
639
39.0
1,000
29.4
2.3
0
1,000
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deferred Tax
Capital Employed
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Capital WIP
Prop. Lease Dep.&Other long term assets
Investments
Curr. Assets, L&A
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Others
Curr. Liab. and Prov.
Account Payables
Other Liabilities
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates
2011
411
5,570
5,981
1,487
-33
7,436
5,056
1,935
3,121
446
1,068
2,372
3,428
1,511
160
26
1,718
13
3,000
2,771
159
70
428
7,436
2012
413
6,172
6,585
2,591
2
9,178
6,440
2,272
4,168
298
2,503
2,842
2,844
2,120
192
71
389
71
3,477
2,361
1,023
93
-633
9,178
2013
415
6,523
6,938
3,293
63
10,294
7,212
2,653
4,559
274
2,833
3,309
3,374
2,438
204
117
470
145
4,056
2,817
1,136
103
-682
10,294
2014
416
6,871
7,287
4,513
100
11,899
8,467
2,976
5,490
319
3,012
3,876
3,892
2,955
260
87
440
149
4,689
3,097
1,519
73
-798
11,899
2015
417
7,236
7,653
5,184
96
12,932
9,684
3,721
5,963
142
3,423
4,065
4,310
3,296
223
49
626
116
4,971
3,314
1,582
75
-661
12,932
2016
420
7,434
7,854
5,902
17
13,773
10,675
4,360
6,315
280
3,666
4,047
4,774
3,859
237
53
547
79
5,309
3,706
1,556
47
-535
13,773
2017E
417
8,406
8,823
5,500
17
14,340
12,099
4,356
7,744
150
3,407
4,147
5,250
3,882
278
204
808
79
6,358
4,357
2,001
0
-1,108
14,340
(INR Million)
2018E
417
9,406
9,823
5,500
17
15,340
13,588
4,892
8,696
150
3,952
4,247
5,940
4,278
324
351
909
79
7,646
5,070
2,576
0
-1,706
15,340
7 November 2016
6

Shoppers Stop
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout %
Valuation (x)
P/E
Cash P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoCE Adjusted for Inv
RoIC
Working Capital Ratios
Debtor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
Profit before tax
Add : Depreciation
Interest
Direct Taxes Paid
Incr in WC
Ch In DFA
Extra-ordinary Income
CF from Operations
Incr in FA
Free Cash Flow
Investments
CF from Invest.
Increase in networth
Increase In debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Incr/Decr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2011
9.1
12.9
72.8
0.8
8.2
2012
7.8
12.4
80.1
0.8
9.6
44.8
28.1
1.5
20.0
4.3
0.2
16.6
13.6
19.0
19.7
3
2.3
0.2
10.2
9.7
14.2
13.0
4
2.1
0.4
2013
4.8
11.0
84.4
0.8
15.6
72.5
31.6
1.3
22.5
4.1
0.2
5.9
6.2
9.1
7.9
3
2.2
0.5
2014
4.5
12.1
88.7
0.8
16.6
77.0
28.8
1.1
19.0
3.9
0.2
5.3
5.6
8.3
7.7
3
2.3
0.6
2015
4.9
15.4
93.1
0.7
15.3
71.3
22.6
1.0
15.7
3.7
0.2
5.5
5.7
8.4
7.4
3
2.4
0.7
2016
5.8
17.8
95.6
0.0
0.0
59.8
19.5
0.9
14.0
3.6
0.0
6.3
6.2
8.9
7.8
3
2.5
0.8
2017E
9.3
22.2
107.4
0.0
0.0
37.6
15.7
0.8
12.9
3.2
0.0
9.3
7.9
11.2
8.0
3
2.6
0.6
2018E
12.0
27.0
119.6
0.0
0.0
29.1
12.9
0.7
10.4
2.9
0.0
10.7
9.1
12.6
9.8
3
2.8
0.6
(INR Million)
2018E
1,639
536
564
639
-745
0
0
2,845
1,489
1,356
100
1,589
0
0
564
0
-545
-1,109
147
204
351
2011
1,138
68
145
387
613
13
1
366
650
-284
1,175
1,825
2,210
-506
145
70
-34
1,455
-4
30
26
2012
978
337
250
335
-1,107
35
0
2,301
1,235
1,067
470
1,705
33
1,103
250
72
-1,366
-552
45
26
71
2013
610
381
319
211
-95
60
-7
1,126
749
377
467
1,216
34
703
319
73
-210
135
46
71
117
2014
634
324
419
257
-86
37
-7
1,161
1,299
-138
567
1,866
51
1,220
419
73
-105
674
-30
117
87
2015
696
744
512
288
175
-4
0
1,493
1,041
452
189
1,230
34
671
512
75
-419
-302
-38
87
49
2016
836
639
573
346
122
-79
-238
1,421
1,128
293
-18
1,110
-50
718
573
0
-401
-307
4
49
53
2017E
1,267
-4
562
494
-724
0
0
2,054
1,295
759
100
1,395
196
-402
562
0
259
-508
151
53
204
7 November 2016
7

Shoppers Stop
Corporate profile
Company description
Shoppers Stop (SHOP) is one of the largest
department store chains in India, with 73 stores
and retail space of 4.2msf. The company is
promoted by CL Raheja Group, one of the
largest real estate groups in the country. SHOP
has also entered specialty retail formats like
Home Furnishing (Home Stop) and Beauty
(Estee Lauder and M.A.C.). It also has presence
in the high potential Hypermarket space
through its 51% subsidiary, HyperCITY.
Exhibit 2: Shareholding pattern (%)
Sep-16
Promoter
DII
FII
Others
67.1
13.4
3.4
16.2
Jun-16
67.1
13.2
3.4
16.3
Sep-15
67.2
12.2
4.5
16.2
Source: Capitaline
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 3: Top holders
Holder Name
Reliance Capital Trustee Co. Ltd A/C
Reliance Equity
Icici Prudential Life Insurance Company Ltd
Birla Sun Life Trustee Company Private
Limited AC
Miraj Marketing Company Llp
Zodiac Clothing Company Limited
% Holding
9.9
3.6
3.3
2.8
1.8
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Chandru L Raheja
B S Nagesh
Govind Shrikhande
Prashant Mehta
Designation
Chairman
Vice Chairman
Managing Director
Company Secretary
Exhibit 5: Directors
Name
Avinash Bajaj
Neel C Raheja
Nitin Sanghavi
Abanti Sankaranarayanan
Manish Chokhani
Name
Deepak Ghaisas
Nirvik Singh
Ravi C Raheja
Gareth Thomas
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Deloitte Haskins & Sells LLP
Type
Statutory
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
9.3
12.0
Consensus
forecast
7.6
11.1
Variation (%)
22.4
8.4
Source: Bloomberg
Source: Capitaline
7 November 2016
8

Shoppers Stop
NOTES
7 November 2016
9

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