Hold V-Mart Retail: target of Rs 2100: ICICI Securities

ICICI Securities's research report on V-Mart Retail

Key highlights from V-Mart Retail’s Q4FY24 result: (1) Steady 5% YoY SSSG in VMART, (2) sharp improvement in Unlimited SSSG at 13% (vs 1% in Q3) driven by higher volume growth despite 10% YoY reduction in ASP. It (Unlimited) also had benefits from accelerated closure (closed 9 stores in 4Q) of underperforming stores (13 stores in FY24; 79 stores now). Losses from LimeRoad declined 14% QoQ, but loss margin at -80% improved marginally (by 3%) QoQ (vs -83% in Q3). Consequently, EBITDA margin in FY24 continued to be under stress (~8% vs break-even expectations of >12%). Rise in creditor days (to 83 days vs pre-covid 5Y average of ~45 days), in this context, is concerning. While most of the stress in Unlimited may have been addressed, getting unit economics of LimeRoad right would be the key. HOLD.

Outlook

We maintain HOLD with a revised DCF-based target price of INR 2,100 (vs INR 2,000 earlier). Key downside risks: Delayed recovery of online business and Unlimited, increase in competitive intensity from online/offline players. Key upside risks: Sharperthan- expected scale-up in operating margin and early recovery in LimeRoad.