Celfin Bullish on Chile Retailers

Chile’s Celfin Capital initiates coverage of Cencosud’s stock with a buy recommendation and a price target of CLP1,320, a 23% hike from the stock’s CLP1,075 price January 21. Cencosud, says Celfin, derives 70% of its revenue from food sales, which represent a resilient income base in a volatile economic environment. It also says that although margins could experience pressure as consumers trade down and buy cheaper products, overall sales and Ebitda levels are unlikely to take a hard hit. The major challenges Cencosud faces, says Celfin, are the entrance of Wal-Mart to the market and the risk of a worse-than-expected downturn. These are the same challenges faced by Falabella, which Celfin also rates a buy. The shop expects Falabella to use cash to expand in Peru and Colombia, where it has been operating for more than 13 years with local partners.