Particulars | Units | Vishal Retail | Pantaloon Retail | | Kewal Kiran | Shoppers Stop | Provogue | Gokaldas Exports |
Industry | | Retail | Retail | Retail | Apparel | Retail | Apparel | Apparel |
Sales | Rs.crore | 602.7 | 2885.2 | 613.3 | 133.6 | 828.0 | 239.0 | 1039.7 |
OPM | % | 11.1 | 6.8 | 10.5 | 24.4 | 9.6 | 14.1 | 12.5 |
PAT | Rs.crore | 25.0 | 68.5 | 33.9 | 18.7 | 24.2 | 19.3 | 70.5 |
PAT Margins | % | 4.15 | 2.37 | 5.53 | 13.96 | 2.92 | 8.06 | 6.78 |
EPS | Rs.per share | 11.15 | 4.87 | 21.54 | 15.17 | 6.99 | 11.72 | 20.52 |
PE ratio | Times | 24.21 | 106.30 | 32.73 | 12.49 | 85.28 | 40.62 | 12.63 |
Market price | Rs.per share | 270 | 517.3 | 704.8 | 189.4 | 596.1 | 476.05 | 259.2 |
RONW | % | 19.71 | 12.1 | 5.7 | 19.1 | 8.8 | 10.7 | 16.9 |
Book Value | Rs.per share | 69 | 38 | 227 | 79 | 87 | 59 | 121 |
Market Cap | Rs.crore | 605 | 7278 | 1111 | 233 | 2076 | 909 | 891 |
Equity Share Capital | Rs.crore | 22.4 | 28.14 | 15.76 | 12.325 | 34.83 | 19.0976 | 17.19 |
Earnings growth Rate | % | 100.3 | 17 | 20.65 | 60 | negative | 49.65 | 15.67 |
Face value | Rs.per share | 10 | 2 | 10 | 10 | 10 | 10 | 5 |
Market Cap to sales | Times | 1.00 | 2.52 | 1.81 | 1.75 | 2.51 | 3.80 | 0.86 |
PE Growth Rate | Times | 0.24 | 6.25 | 1.58 | 0.21 | negative | 0.82 | 0.81 |
No.of equity shares | Crore | 2.24 | 14.07 | 1.576 | 1.2325 | 3.483 | 1.91 | 3.438 |
Price to book value | Times | 3.90 | 13.79 | 3.11 | 2.40 | 6.89 | 8.14 | 2.14 |
Retail Space | Sq feet | 12,59,556 | 50,00,000 | 11,00,000 | | 28,00,000 | | |
Listing Scenario
Scenario -1 | Sum of Parts Valuation of the business | | ||
Segment revenue | % contn to revenue | Comparable company | Adjusted PE of Company | Sum of Parts Valuation |
Apparel | 63% | Provogue | 32 | 20.2 |
Non Apparel | 22% | Shopper Stop | 85.28 | 18.8 |
FMCG | 15% | Pantaloon | 106.3 | 15.9 |
| | Expected PE for Vishal Retail | 54.87 | |
| | EPS for FY 2007 | 11.15 | |
| | Target Price upon listing | 612 |
Under Scenario 1, I have assumed the sum of parts valuation method of the various businesses of Vishal Retail Ltd. to arrive at its probable target price upon listing. As per this assumption the target price works out to Rs.612 against the issue price of Rs.270.
- In the apparel business, an aggressive comparable listed player is Provogue India which has a similar business line to Vishal Retail as far as apparel manufacturing is concerned.
- In the non apparel segment Shoppers Stop is the most active player
- Though Pantaloon is the big daddy having a presence in all retail segments, we have taken the proportionate PE for the FMCG business alone.
Based on an EPS of 11.15, the price of Rs.612 discounts trailing FY 07 earnings by 55 times approximately. Though Pantaloon and Shoppers Stop may be bigger in size and scale compared to Vishal retail, they still trade at remarkably high valuations as denoted above in the table which should augur well for Vishal Retail’s listing too.
Listing Scenario 2: Based on Retail Space comparison with major retail players
| Scenario -2 | | As on 31/03/2007 | |
A | Vishal Retail Space | Square feet | 1259556 | |
B | Pantaloon Retail Space | Square feet | 5000000 | |
| Size of Vishal Retail | A/B | 0.25 | |
| Market Cap of Pantaloon | Rs. Crore | 7278 | |
| Expected Market Cap of Vishal Retail | Rs. Crore | 1419 | D |
| (At 78% of Pantaloon) | (For apparel and FMCG) | (0.78*7278*0.25) | |
C | Shopper Stop Retail Space | Square feet | 2800000 | |
| Size of Vishal Retail | A/C | 0.45 | |
| Market Cap of Shopper Stop | Rs. Crore | 2076 | |
| Expected Market Cap of Vishal Retail | Rs. Crore | 206 | E |
| (At 22% of Shopper Stop) | (For non apparel) | (0.22*0.45*2076) | |
| | | | |
| Total Market Cap | Rs. Crore | 1625 | D+E |
| No.of equity shares | Crore | 2.24 | |
| Expected Market Price | | 725 | |
Therefore the target price under Scenario 2 is Rs.725
Scenario 3: Trent and Vishal Retail are of similar size based on the land reserves held by them.
Scenario -3 | | Vishal | (Similar Sized Players) |
Market Cap to Sales | 1.81 | 1 | |
Extrapolating for Vishal Retail for valuation gap - market Cap comes to | 1090.9 | crore | |
Valuation per share | 487 | |
Therefore even assuming a conservative estimate of 1.81 as the market cap to sales ratio for Vishal Retail, the stock should reach Rs. 487 on the listing date itself. Also another factor that favours Vishal retail is that it’s a much diversified player when compared to
Vishal retail has the first mover advantage in Tier 2 and 3 cities and has a good brand recall in these cities and it’s creating a pan
Under these circumstances, it can be safely assumed that Vishal Retail will trade within the range of Rs.500 -600 during the listing week (i.e from 4 th July to 11 th July) and if the market conditions continue to be favourable, it can even take out the target price of Rs.725 in the near term given the superior margins, low gearing and earnings growth momentum of the company compared to Pantaloon Retail and Shoppers Stop, albeit the company will always trade at a discount to Pantaloon Retail given its relatively smaller size and distribution.
1 comment:
Informative, good one.
Raza
http://razasaghar.blogspot.com/
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