>KOUTONS RETAIL (ICICI DIRECT)

High interest hits bottomline…

Koutons Retail’s Q1FY10 results are better than our expectations in terms of profitability. The company reported net sales of Rs 201.8 crore against Rs 157.8 crore in the corresponding quarter of the previous year, 27.8% growth. This was due to a 23.7% YoY rise in retail space under operations. The EBITDA margin improved 405 bps to 23.8% in Q1FY10 against 19.9% in Q1FY09 on account of more than proportionate reduction in other expenses. The net profit grew to Rs 11.5 crore against Rs 10.3 crore in Q1FY09, a meagre 11.7% growth YoY due to high interest cost (107% YoY increase).

Highlight of the quarter
• Koutons Retail added net 0.25 lakh sq ft in the quarter taking the total space under operations to 12.92 lakh sq ft

• A total of 35 stores were closed during the quarter

Valuations
At the CMP of Rs 398, the stock is trading at 10.6x and 7.7x its FY10E and FY11E earnings, respectively. We remain positive on the asset-light business model of the company. However, we expect the margins to be under pressure in the coming quarters due to the current macroeconomic scenario and weak consumer sentiments, where we are cautious. We maintain our target price of Rs 505 per share with an OUTPERFORMER rating, valuing the
company at 10x its FY11E earnings of Rs 50.6 per share.

To see full report: KOUTONS RETAIL