Buy V Mart Retail; target of Rs 5150: Anand Rathi

Anand Rathi's research report on V Mart Retail

Continually good offline margins, lower Limeroad losses and efficiency measures pushed up V-Mart’s Q3 EBITDA margin to 16.7%, considerably above ARe. SSSG was 10% in Q3. The product mix, quality, sourcing and design initiatives over the past 12–18 months led to a third quarter of doubledigit SSSG. Footfalls grew 40% y/y with a 43% conversion rate. Apparel ASP was flat y/y. 49 stores were added in 9M FY25 and five closed. Sales per sq. ft improved for the co. avg/Vmart ~13/12% y/y to Rs729/758 in Q3, with its new stores delivering higher SPSF than the company average. On track to add 50+ stores for the year. Most store closures are behind and 1-2% of stores will be shut yearly. With pricing to be more attractive to customers, margin expansion is not on the cards. Unlimited’s new tier 3/4 stores continue to do well, with margins on par with V-Mart’s core stores, aligning with the goal to bring Unlimited's SPSF to V-Mart levels in two years.

Outlook

Further govt. incentives for apparel manufacturing units (labour, capital subsidies) should support large-scale production in India, benefiting players like V-Mart. Our FY25-27e sales are ~2% lower on average; our EBITDA, ~1% lower. We retain our Buy rating with a 12- month TP of Rs5,150, 21x FY27e EV/EBITDA (earlier Rs5,624, 21.5x FY27e).