Buy Vishal Mega Mart; target of Rs 180: Motilal Oswal

Motilal Oswal's research report on Vishal Mega Mart

Vishal Mega Mart (VMM) delivered another strong quarter, with ~22% YoY revenue growth, led by 25 net store additions (+15% YoY) and robust ~12.8% adjusted SSSG, benefiting from an early festive season. Gross/EBITDA/pre-IndAS EBITDA margins expanded 5bp/80bp/100bp YoY, driven by operating leverage and robust cost controls. Management estimated the SSSG boost of ~150-200bp from the shift in the festive season. However, it remains optimistic about improvement in consumer sentiment, following the recent policy measures. The company reiterated its focus on maintain gross margins and investing the surplus to improve product proposition and drive growth, while operating leverage should aid EBITDA margin expansion.

Outlook

We reiterate our BUY rating with a revised TP of INR180, premised on DCF implied ~43x Dec’27E pre-IND AS 116 EV/EBITDA (implying ~31x Dec’27E reported EBITDA and ~65x Dec’27E P/E).