Pantaloon Retail (PRIL) recorded positive Same Store Sales (SSS) for the two consecutive months of January and February 2009, after having plunged and recorded negative growth in November 2008 and ruling weak in December 2008.
Amidst the ongoing economic slowdown, Pantaloon’s Lifestyle Retailing Segment sprung a surprise registering higher SSS growth than Value Retailing in January 2009.
The Lifestyle Retailing Segment reported a better performance on the back of the month-long Great Indian Shopping Festival held by the Future Group in December 2008-January 2009 and increased consumer confidence compared to the last quarter of CY2008.
The segment witnessed healthy y-o-y SSS growth of 12% in January 2009 v/s 14% degrowth registered in December 2008.
On the other hand, the Value Retailing Segment witnessed yoy SSS growth of 4% in January 2009 as against 3.6% degrowth in December 2008.
The positive trend continued in February 2009 with the Value and Lifestyle Retailing Segments recording y-o-y SSS growth of 5.3% and 4.4%, respectively.
The sustained sales growth in February 2009 can also be attributed to aggressive pricing, continuous promotional efforts and availability of more credit for consumers following softening of Interest rates.
Pertinently, on a y-o-y basis, SSS growth of PRIL Standalone is nearing July 2008 levels, which is an indicator of revival in consumer sentiment.
We are positive on PRIL, as it has been able to maintain its growth (YTD) at a healthy 31% on a standalone basis and 34% on a consolidated basis despite the slowdown.
We believe that PRIL (standalone) would be able to meet our FY2009 and FY2010 net sales estimates of Rs6,894 crore and Rs8,492 crore, respectively. We estimate the company to clock net profit of Rs154.6 crore and Rs217.8 crore in FY2009 and FY2010, respectively.
On the bourses, the PRIL stock has witnessed significant correction in the past few months and is currently trading at attractive valuations and provides favourable risk-reward for the investors.
At Rs138, the stock is trading at 11.1x FY2010E Earnings and 1.6x FY2010E P/BV. We have valued PRIL standalone at Rs173. We have valued PRIL’s stake in FCH, HSRIL and Future Bazaar at Rs33, Rs13 and Rs20, respectively.
We maintain a BUY on the stock, with SOTP target price of Rs239, translating into an upside of 73% from current levels.