MOSL: FUTURE RETAIL (Buy)-Consistent delivery-store expansion to continue
Future Retail: Consistent delivery; store expansion to continue
(FRETAIL IN, Mkt Cap USD3.2b, CMP INR439, TP INR550, 25% Upside, Buy)
- Beat on all fronts driven by healthy SSSG: 4QFY19 standalone revenue grew 18% YoY (7% beat), while gross margin contracted marginally (highlighting the competitive market). The strong revenue growth translated into EBITDA margin improving to 5.4% YoY (+100bp), driving 44% YoY EBITDA growth and 45% YoY Adj. PAT growth (27% beat). FY19 revenue/EBITDA/Adj. PAT grew 9%/25%/19%.
- Strong SSSG in Big Bazaar; Easyday building membership program: FRL posted overall healthy 11.2% SSSG (Big Bazaar (BB) posted 13.6% SSSG). In FY19, FRL added net 7/33 stores of Big Bazaar/FBB, including 14 Food Bazaar Easyday is seeing strong ramp-up with 440 store adds. It is building a strong membership model, reflected in total members more than doubling to >1.1m with annualized >INR30k spend/member.
- Steady growth and margin improvement trajectory to continue: We have built in 15/10/200 new store adds for Big Bazaar/FBB/Easyday in FY20-21, with 9% SSSG for Big Bazaar. This should drive healthy revenue/EBITDA CAGR of 13%/18% over FY19-21E (50bp margin improvement). Its balance sheet size saw significant increase in FY19 owing to sharp increase in net capex and WC. Subsequently, we have revised our depreciation and finance cost estimates, thus cutting EPS by ~10%.
Future Retail Limited is an India-based company, which is engaged in the business of retailing a range of household and consumer products through departmental store facilities under various formats. The Company is primarily engaged in the business of multi-brand retail trade. The Company has access to approximately 20 compact hypermarket easyday stores and over 210 supermarket easyday stores. Its retail formats primarily consists of value business and home business. In its value business, the Company formats include Big Bazaar, a hypermarket format; Food Bazaar, a supermarket; fbb, a fashion destination; Foodhall, a supermarket, and easyday convenient stores. In its home business, the Company operates Home Town, a one-shop destination for home improvement, and eZone, a consumer durable and electronics chain.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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