Buy V-Mart Retail; target of Rs 3920: Motilal Oswal

Motilal Oswal's research report on V-Mart Retail

V-Mart Retail (VMART)’s revenue was up 2.3x YoY, 61% below pre-COVID levels (1QFY20). This is closer to other retailers’ performances, as the second COVID wave has seen lower impact. EBITDA loss at INR20m recovered 67% YoY (6% miss). Given the expectation of swift recovery from the second COVID wave lockdowns by 3QFY22, we raise our FY23E revenue/EBITDA estimates by 7%, factoring in a revenue/EBITDA CAGR of 12%/14% over FY20–23E. The recent acquisition announcement of the “Unlimited” Value Retail chain and aggressive store additions in core markets should drive steady growth – which may be well-supported by a lean balance sheet, supported by the recent QIP. Maintain Buy.

Outlook

We assign a 23x FY23E EV/EBITDA multiple to arrive at our TP of INR3,920 (v/s INR3,880 earlier). Given the huge growth opportunity in the Value Fashion segment and V-Mart’s strong execution capability, it has the potential to garner 25–30% EBITDA/PAT growth sustainably for a prolonged period – backed by 20%+ revenue growth (SSSG + new store adds). Maintain Buy.

For all recommendations report, click here