Future Retail soars 10%; Morgan Stanley initiates coverage with overweight rating

NEW DELHI: Shares of Future Retail shot up nearly 10 per cent in Tuesday’s trade after the ET reported that the Future Group is exiting speciality retail formats as part of a larger strategy to focus on its core fashion and food businesses.

According to an ET report, the group plans to sell home furnishings business HomeTown, shut sportswear arm Planet Sports and merge stores of electronics chain Ezone within supermarket BigBazaar.

Following the report, the stock shot up 9.74 per cent to hit a high of Rs 257.45 on BSE. At the prevailing level, the stock is trading at 32 times its trailing 12-month earnings per share(EPS) and 0.62 times its book value.

The move is expected to affect 180-200 of the about 1,200 outlets that the nation's largest retailer runs across supermarket, department store and single-brand formats, the report added.

Meanwhile, brokerage Morgan Stanley has initiated coverage on the stock with an overweight rating, with a target of Rs 340, suggesting about 40 per cent potential upside.

“FRL emerged from recent restructuring as a scalable & asset-light business

We believe stock set for steady re-rating given relatively low competitive intensity. Positives: strong brand construct, scalability, focus on capital efficiency, improving return ratios,” the brokerage said.