Reviews

We had previously recommended Shoppers Stop in Volume 34, Issue No. 13, dated February 18 – March 3, 2019, under the ‘Choice Scrip’ segment. It was recommended based on the company’s healthy same-store sales growth, top line traction across segments and reduction in debt. The scrip was then recommended at  Rs497. Shoppers Stop is engaged in the business of retailing a range of household and consumer products through departmental stores. 

On a consolidated quarterly front, net sales fell marginally by 0.57 per cent to  Rs1,018.99 crore in Q3FY20 from  Rs1,024.87 crore in Q3FY19. The company reported an operating profit of  Rs61.63 crore in Q3FY20, down by 7.39 per cent from  Rs66.55 crore in Q3FY19. Largely on account of deferred taxes, the company incurred a net loss of  Rs6.51 crore in Q3FY20 as against a net profit of  Rs41.66 crore in Q3Y19

On an annual basis, net sales fell by 3.21 per cent to  Rs3,577.93 crore in FY19 from  Rs3,696.72 crore in FY18. The company reported an operating profit of  Rs109.91 crore in FY19, down by 62.28 per cent from  Rs291.41 crore in FY18. Net profit was down by 69.71 per cent in FY19, falling to  Rs64.97 crore from  Rs214.46 crore in FY18. 

The company remains debt-free and hasadded 15 stores in the December 2019 quarter, with plans to open several more in the near future. This expansion has been financed through internal accruals, which is likely to improve same-store sales growth of the company. Moreover, the management has also indicated that it intends to negotiate lower lease rentals which should help boost profit margins in the quarters ahead. Thus we recommend a HOLD.

We had previously recommended National Aluminium Company Limited (NALCO) in Volume 34, Issue No. 14, dated June 10-23, 2019 under the ‘Low Scrip’ segment. The stock was then trading at  Rs50.25 and was recommended based on the company’s growth prospects and well-integrated business model.

NALCO is Navratna CPSE under the Ministry of Mines. Its operations are integrated and diversified across the fields of mining, metal and power. 

On the consolidated financial front, the company posted net sales of  Rs2,088.35 crore in Q3FY20, down by 23.19 per centfrom  Rs2,718.88 crore in Q3FY19. The PBDT was  Rs80.91 crore, depicting a fall of 86.24 per cent in Q3FY20 from  Rs588.16 crore posted in Q3FY19. In Q3FY20, NALCO incurred a net loss of  Rs33.96 crore as against a net profit of  Rs301.76 crore gained in Q3FY19. 

On the annual front, the new sales came in at  Rs11,499.32 crore in FY19 as against  Rs9,618.31 crore in FY18, a growth of 19.56 per cent. The PBDT in FY19 increased by 27.66 per cent to  Rs3,216.02 crore as compared  Rs2,519.23 crore posted in FY18. In FY19, the company gained a net profit of  Rs1,732.40 crore, clocking a growth of 29.05 per cent from  Rs1,342.41 crore gained in FY18.

Despite the weak quarterly performance, stability in aluminium prices is expected to improve the company’s growth performance. NALCO’s Board of Directors has approved the payment of an interim dividend of  Rs1.5 per share for FY19-20. We thus recommend a HOLD.