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Multibagger retail stock could rise more as ICICI Securities sees upside


Covid-led disruptions in January-February and one-off expenses led to a subdued Shoppers Stop’s performance in Q4FY22. The revenue recovery rate declined to 90% in Q4FY22 vs 96% in Q3FY22, highlighted brokerage and research firm ICICI Securities.

With the new management team in place, the brokerage expects a revival in Shoppers Stop’s revenue trajectory and margin profile. Reasonable valuations prompt it to remain positive on the stock. It has maintained Buy rating on Shoppers Stop shares with a target price of 595 apiece with time period of twelve months. 

The stock price has underperformed the broader indices over the last five years on account of weak SSSG, muted store addition pace and lower share of private label brands.

“We believe the new MD (former Westside CEO) would bring in his expertise in the private label brands domain and focus on enhancing the share of high margin private label brands (~14% of revenues) It has embarked on a healthy store addition plan with the opening of 12 departmental stores and 15 beauty stores in FY23E,” the note stated. 

Majority of the store additions in Tier II/III cities. Capex for the same is expected to be 150 crore, which will be funded mainly through internal accruals. Further, the management expects steady SSSG growth of 9-11% in the near term.

Key thrust on accelerating investments in omni-channel with long term target of channel contributing 20% of sales from current ~8% and Hhigher focus on beauty segment (currently ~17% of revenues) through scaling up of its own private brand Arcelia could act as key triggers for future price performance, as per ICICI Securities.

The multibagger stock has rallied over 151% in a year’s period, whereas it is up about 52% in 2022 (YTD) so far.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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