HDFC Securities said that while Shopper Stop's Q3FY23 revenue beat its estimates it remains wary of the "long-term risks of business relevance/longevity" facing the company.

The Shoppers Stop Analyst: HDFC Securities' Jay Gandhi maintained the ‘sell' rating for the stock with a target price of ₹460, an almost 31% downside from the CMP. 

The Shoppers Stop Thesis: The brokerage firm noted that the company's ₹1,131 crore in revenue – a 19% year-over-year– beat its estimate of ₹1,075 crore. 

The firm also pointed out that the company's store expansion remained healthy it is likely to stay that way going forward. 

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Based on the numbers, HDFC Securities increased its EBITDA estimate for FY24/25 by 11% and 9% to account for higher store additions and improved sales density-led profitability.

However, in their research note, the firm highlighted that despite all this the company's gross margin at 40.9% largely remained flat. The company's EBITDA contracted  by 49bps to 18.7% "as promotional spends toward store renovation, and beauty segment-related campaigns outpaced revenue growth."

It also warned about the long-term risks of business relevance/longevity facing the company, as it competes with "deep-pocketed e-tailers"

Price Action: Shoppers Stop Shares were up close to 1% at ₹672.05 in the late hours of trading on Friday.

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