􀀗 Sales growth likely to remain weak but
cost control could protect margins
􀀗 Sector unattractive: low ROEs, high
leverage and weak consumer sentiment
􀀗 We advise investors to stay away from
the sector for the time being
Wait for sustained recovery: While same store sales (SSS)
growth is likely to improve in the Jan-March quarter from
the low in December, it may not be sustained as pressures on
disposable incomes increase. We are cautious about any
short-term signs of margin expansion or reduction in
working capital.
Belts being tightened: Expansion is likely to be cut due to
delays by mall developers, re-evaluation of the viability of
new stores and the weak financial position of retailers.
Retailers are also cutting overheads and this may help
protect EBITDA margins from the impact of slowing sales
and pressure on gross margins. These factors have already
been built in and we do not change our ratings, target prices
or estimates in this report.
Sector looks unattractive: Most retailers are heavily
leveraged with debt/equity ratios above 100%. Some have
debt due for repayment and could face severe liquidity issues
if the debt can’t be rolled over. High interest costs have hit
margins hard and ROEs are below cost of capital due to low
margins and high working capital. The sector looks
unattractive and further downside cannot be ruled out.
Risks: Further slowdown in spending, high financial and
operating leverage, and risk of inventory write downs.

目录

The road ahead 3
Wait for sustained recovery 3
Same store sales growth – double dip 4
Going slow on expansion 4
Profit margins 5
Gross profit margins 5
EBITDA margins 5
Leverage 6
Valuation 7
Risks 7
Trend analysis 8
Falling sales 8
Increasing inventory per square feet 8
Controlling operating expenses 9
Employee costs 9
Other expenses 9
Mixed impact at EBITDA 10
Interest expenses hit hard 10
Appendices 11
Titan Industries (TTAN) 13
Vishal Retail Ltd 18
Shoppers Stop (SHOP) 22
Disclosure appendix 27
Disclaimer 32
Contents