Pantaloon Retail – Future Group – Riding Retail Spend

Pantaloon’s 4QFY10 revenues grew 91% yoy to Rs31.8bn. The underlying samestore sales growth (SSSG) for value retailing was 11%, while the lifestyle SSSG came was 19%. EBITDA grew 15% yoy to Rs2.1bn. PBT (pre-ex) grew 36% yoy to Rs750mn due to higher other income. Tax reversal led to adjusted PAT growth of 154% to Rs927mn.

Lifestyle-retailing delivered SSS growth of 19.4% YoY on a normal base quarter. Valueretailing SSS grew 11.5% YoY – marginally slower growth than in 3QFY10, but on a much stronger base quarter. Home-retailing SSS grew 57% YoY on a very weak 4QFY09, which had seen c30% YoY decline.

PRIL added c.1.7m sq ft in FY10 on a base of 9.3m at the end of FY09. FY10 revenue/ sq ft increased c.19% yoy; lifestyle division with 14% SSSG contributing the most to the growth. Pantaloon has merged the home solutions business (HSRIL) and divested stake in
non-core operations. A wholly owned subsidiary FVRL has been created for the value retail business.

Management notes that core retail debt dipped modestly from Rs32bn to Rs29.1bn. Given consolidated interest costs are Rs4.93bn (vs. Rs3.91bn for retail), we believe consolidated debt is ~Rs39-40bn. This implies consolidated debt-equity of ~1.3x, which is better than FY09 (1.5x). Core cash generation, will need to improve.

Pantaloon Retail India Ltd – EPS Expectations and Stock Target [Year Ends in June]
Citi – FY 11 16.24 and FY 12 18.93 with a target of Rs 473
UBS – FY 11 14 and FY 12 18 with a target of Rs 600
IIFL – FY 11 16 and FY 12 22 with a target of Rs 527