>RETAIL SECTOR (NOMURA)

Much more in store
The Indian organized retail sector has seen both boom and bust this decade, but we think the structural growth story is back on track, with same-store growth for the sector now touching 8-9%, on our estimates. As consumer confidence has rebounded after the global recession, we are once again seeing the evolution of the vast Indian retail sector from its traditional formats to modern retail, and this process still has a long way to go, supported by rising incomes and favourable demographics. We estimate organised retail penetration is just nudging 10% this year and project 20% by 2020F, which is still significantly below current penetration levels in many other emerging Asian markets. There aren’t many large-cap listed names in organised retail at the moment, but we believe our top BUY, Pantaloon Retail (PRIL), offers quality exposure to this theme. We expect PRIL’s revenues to post a 24% CAGR over FY10E-FY12E, supporting a 48% CAGR in net income, as the benefits of scale, cost savings and improved balance sheet structure flow through. The company has also initiated a restructuring programme to focus on its core businesses, which we think should be a catalyst for the stock. We reiterate our BUY rating on Titan Industries with a raised target price, for its distinctive exposure to high-end discretionary spending.

■ Organised retail to witness robust growth
■ Industry in a transformation phase
■ We are Bullish on F&B category and consumer discretionary
■ Market leader Pantaloon Retail to be a long-term winner

To read the full report: RETAIL SECTOR