>INDIA RETAIL: Expectations on on strong performances by JUBI, TTAN and BATA

Q3FY12 preview: A mixed bag 


We expect our retail universe to report a strong 21.8% YoY revenue growth for Q3FY12 on strong performances by JUBI, TTAN and BATA. At the same time, a key metric to monitor would be volume growth deceleration across categories due to high inflation, a spike in apparel prices and increase in gold prices. We maintain that discretionary spends would likely remain under pressure going forward, given the slowing GDP growth that would in turn pressurise margins. Our top pick in the space is BATA, and we remain UNDERWEIGHT on JUBI, TTAN and SHOP. v BATA to maintain strong growth trajectory: We expect BATA to report a strong 25% revenue growth led by robust double-digit volume growth, which would in turn be driven by space addition. We expect margin improvement for the company to continue with Q4CY11 margins likely improving 180bps YoY due to leverage on employee costs and overheads. PAT growth for BATA will be the strongest ever at 42% YoY to Rs 490mn.


■ TTAN to witness marginal slowdown in jewellery volumes, largely compensated by higher gold prices: We expect TTAN’s jewellery volumes to see a low single-digit drop led by high gold prices (up 39% YoY for the quarter); the business would see value growth of 37%. The Watches business would likely see 15% revenue growth (led by a 5−7% price hike). While EBITDA margins would likely contract ~70bps YoY due to lower margins in the watches business, PAT would see a strong 27% YoY growth to Rs 1.75bn.


■ JUBI to see marginal growth moderation: JUBI is likely to report a strong 40% growth in revenues with same-store-sales (SSS) growth at ~25% levels. We expect a gradual tapering off in SSS growth going forward, as the outlook on discretionary spends remains muted. EBITDA margins are likely to improve by 65bps YoY as the company has taken a ~5% price increase to counter input cost inflation. We expect
PAT growth for JUBI at 36% YoY to Rs 258 mn.


■ High interest costs to impact PF earnings: PF is likely to see a slowdown in SSS growth (2−3% levels) as Diwali sales have not been strong for the company. We expect PF to report a 13% YoY increase in sales led largely by space addition. While margins are likely to improve 60bps YoY, a 30% YoY increase in interest costs to Rs 1.4bn will impact PAT growth for the company (expect a 4.6% YoY decline in
PAT to Rs 451mn).


■ SHOP to report PAT of Rs 86mn in Q3FY12: SHOP’s Q3FY12 consolidated revenues are likely to grow 16.5% YoY to Rs 8bn driven by high single-digit SSS growth. Standalone sales are likely to see a growth 13% YoY while HyperCity sales 25% YoY. EBITDA margins, however, could dip by 60bps YoY on account of consolidation of HyperCity losses, while PAT would likely plummet by 48% YoY to
Rs 86mn.


To read the full report: INDIA RETAIL
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