IDFC Securities has maintained 'outperform' rating for Shoppers Stop shares and said that shares of the company can touch Rs 492 in the next few quarters.
Shoppers Stop shares jumped as much as 7 per cent in the intraday on Thursday after reports that it has entered into a strategic partnership with Snapdeal for a five-year period to further its omnichannel retail vision. The share closed 0.90 per cent higher at Rs 420.25 on Thursday.
The scrip declined and closed 2 per cent down at Rs 412 on BSE Friday. IDFC Securities issued a research report on Friday in which it has maintained ‘outperform’ rating for Shoppers Stop shares and said that company’s shares can touch Rs 492 in the next few quarters.
Below are five key points which shows why IDFC Securities is bullish on Shoppers Stop.
1) The Snapdeal website will house an online store for Shoppers Stop. Clicking the link will give the consumer access to a large part of Shoppers Stop offline product portfolio through Snapdeal. Shopper Stop gets the opportunity to reach out to 10 times the number of customers that it was doing on its own website. This would result in a better reach for the company, which would accelerate growth.
2) The initiative will go live in the next 60-90 days. This will happen a few months before Shoppers Stop itself launches its own revamped online portal and mobile app. For Shoppers Stop, sales through this tie-up will be at a lower gross margin as it will be shared with Snapdeal; however, given the negligible other overheads in this arrangement, Shoppers Stop will enjoy operating profit margins not very different from those of its existing physical operations.
3) The online retail market was estimated to be $3.5bn in 2014 and is expected to grow to $45bn by 2020.
4) IDFC Securities view the tie-up as a positive development as it kick-starts Shoppers Stop omnichannel journey, which will be more visible in the coming quarters and add incremental revenue drivers.
5) The brokerage house believe this partnership indicates that online and offline retailers will find a hybrid model to co-exist if they are to succeed in the long term. According to IDFC Securities, net profit of Shoppers Stop may jump to Rs 111.9 crore at the end of 2016-17 from Rs 42.4 crore in 2014-15.