Koutons Retail set for better days

Investors in Delhi-based Koutons Retail have not been able to rake in much moolah despite the overall market rally. The stock has been a laggard in the past year, posting a negative return of 31 per cent. But it’s gradually gaining ground having recorded its 52-week low of Rs 293 on January 11.  
Koutons’ performance on bourses, over a longer period, has been consistently bad. For instance, in the past three months, returns on the stock were a negative 5 per cent. And over a six-month period, it was negative 11 per cent whereas the Sensex reported a return in excess of 30 per cent during this period. On an annual performance basis also, the stock under performed the benchmark index Sensex as well as the ET Retail index that gained 92 per cent and 90 per cent, respectively.

The company currently has 230 family stores and 1,388 exclusive brand outlets (EBOs). Most of these are on a franchisee basis, which keeps it an asset-light model for Koutons.

The company has seen a subdued 15 per cent growth in profits in the first half of FY10 despite a good 36 per cent increase in operating margins. The management expects a 300-bp reduction in its interest cost that will further improve margins. At Rs 348 and an annualised EPS of Rs 22.9 for FY10, the stock is valued at 15.3 times its earnings, cheaper than some other retail players.