Dolat Capital Market is bullish on V-Mart Retail has recommended buy rating on the stock with a target price of Rs 2496 in its research report dated November 13, 2020.
Dolat Capital Market's research report on V-Mart Retail
V-MART a leading value fashion retailer in UP & Bihar market (56% of store foot-print) is well-poised to capture the significant growth potential in tier 2-4 cities with aggressive store openings. Vmart’s ethos of prudence and agility, proactive costs, cash flows and vendor management during Covid, cluster-based approach of store expansions and debt free BS provides the necessary ammunition to tap the large addressable market opportunities. Vmart has aced the brick-and-mortar value fashion business with its execution prowess. It excels on sourcing, logistics and assortment. It is among the few to have profitably mastered the game via its ‘better fashion at better value’ OR ‘Price “less” fashion’ concept has created a virtuous loop. Vmart’s business strategy of keeping the ASP and gross/EBITDA margin fairly stable and pass-on the efficiencies at company/vendor level to consumers results in a formidable moat.
We initiate coverage with BUY rating and TP of Rs 2,496 @ 50x Sep-22E EPS. Historically, it has traded at ~86x 1-yr forward earnings. Increasing competition from both on-line and off-line is a key risk. Also, rising share of new stores vs. matured stores (56% or 95 new stores added in FY19 & FY20) in overall mix and longer than expected time to break-even in new stores is another risk. Given the pace of e-commerce growth, it is not too long before it becomes sizeable. V-Mart has cracked B&M retailing and is stepping up in online retailing. These will be key.
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