Buy V-Mart Retail; target of Rs 4210: Motilal Oswal

Motilal Oswal's research report on V-Mart Retail

VMART continued its soft performance v/s its listed peers as revenue (excluding Unlimited stores) grew 4% from 1QFY20 levels to INR4.7b, with a 25% decline in sales per sq. ft. A 660bp improvement in gross margin and cost optimization led to 54% growth in EBITDA over 1QFY20 levels. The ensuing price cuts before its festive sale, but weakness in rural India will lead to some pain over the next few quarters. We have factored in a revenue/EBITDA CAGR of 40%/50% over FY22-24. However, a turnaround in rural India will be key. We maintain our Buy rating.

Outlook

We arrive at our TP of INR4,210, assigning 18x EV/EBITDA on a Mar’24 basis. We maintain our Buy rating.