Sharekhan expects over 48% upside in Provogue

MUMBAI: Sharekhan has reiterated its ‘Buy’ recommendation on Provogue with a price target of Rs 95.

“We expect PIL’s operating profit to grow at 20.6% over FY2010-12 and its margins to improve by 161 basis points to 12.3% by FY2012.

Its subsidiary Prozone Enterprises ( PEPL) is engaged in real estate development in tier-II cities (overall 185 acres of developable land).

The value of the three malls under development along with the residential project in Indore works out to Rs 39 per share (ignoring the other commercial and residential developments, and planned projects in other cities).

PIL is poised to report a healthy earnings growth of 22.8% CAGR (over FY2010-12) in its core business of fashion brand retailing, which itself is valued at Rs 56 per share even at a discounted multiple of 15x compared to PIL’s historical valuation and to the valuation of its peers.

Thus, the current market price is completely ignoring the value in PEPL. Adding Rs 39 per share pertaining to the real estate venture, we arrive at an SOTP valuation of Rs 95 per share for PIL. We have a Buy recommendation on the stock,” the report said.

At 3:15 pm, the stock was at Rs 64.15, up 5.42 per cent on the NSE. It touched a high of Rs 66.85 and low of Rs 60.60 in trade so far.