Recommendation: Buy
Pantaloon Retail is one of the flagship retail companies in India. Though the stock has dropped from a high of Rs 875 to a low of Rs 195, the core underlying business continues to grow at a healthy pace. Pantaloon continues to expand its retail footprint and the weakness in realty is a positive factor.
The mall segment of Pantaloon will be the worst affected in the realty space due to over construction and as builders have preferred not to sell out the units. This will put large pressure on mall developers, and Pantaloon with its large format stores will be the anchor tenant of choice for any mall. The company has already received one-year rent-free offers and ultra-low rentals to follow from many developers. Pantaloon is well-funded and is the least likely to be affected by the credit crunch. With sales of Rs 6,500 crore for FY09E and an EPS of Rs 12, it is available at a market capitalisation of Rs 3,250 crore (P/E of 17).
It is expected to scale up the top line to Rs 15,000 crore over the next few years. I would recommend a Buy call on this stock with a price target of Rs 500 over the next two years.
