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.
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.
Get Ring The Bell, Benzinga India’s weekly briefing. Designed specifically for investors like you.
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.
© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.