Average gross profit increased 17% YoY to Rs327/sqft per month despite negative same store sales growth (SSSG) of 2%. VREL benefited from low procurement costs. We expect SSSG to recover in 2H on the back of strong festive and wedding seasons....

52% Earnings CAGR FY18-20E, Initiate at BUY We initiate coverage on V2 Retail (VREL), India's fastest growing fashion retailer, with a BUY recommendation and Rs590 TP (54% upside). Strong earnings visibility (EPS CAGR of 52% over FY18-20E), net-cash balance sheet and current PER of 18.1x FY20E make VREL's financial profile and valuation attractive....

We had a meeting with the management of V2 Retail (VRL) recently to get an update on its business and the organised value retailing industry in Tier-2 and Tier-3 cities in northern and eastern regions of India. VRL reported flattish YoY revenue growth for 3QFY18 (see Exhibit 1) as the base was high (because of demonetisation) in the corresponding quarter last year (56% YoY growth in 3QFY17). The management attributed the 17% decline in same-store sales growth (SSG) to a very strong base quarter, Durga Puja being in 2QFY18 this year (typically contributes about 40% to revenues in 3Q), reduced marriage days, delayed and subdued winter, and heightened competitive intensity from both national and regional...

V2 Retail (VRL) reported a strong set of numbers for yet another quarter. Sales/EBITDA/PAT grew 33%/32%/215% to Rs1,375mn/Rs100mn/Rs50mn, respectively. The 33% top-line growth was led by 30% volume growth and 3% realisation growth with 3% same-store sales growth or SSG. Floods in some areas where VRL operates marginally impacted the top-line growth. In the absence of floods, sales could have possibly touched Rs1,500mn in 2QFY18, as per the management. The healthy sales growth was accompanied by improvement in gross margin by 320bps to 31.2% on account of a better product mix and increased contribution from private labels. Private...

We had a meeting with the management of V2 Retail recently. We interacted with Mr. Ram Chandra Agarwal, chairman & managing director about the company's business model and future growth drivers. V2, signifying Value' & Variety', is a pure play in the fashion segment with its prime focus on Tier II & Tier III cities where there is a wide gap between aspirational growth and the presence of organised retail. In its first innings as Vishal Retail or VRL, the company suffered operational losses and the brand Vishal was sold in 2011. After this debacle, the company made a fresh start as V2 Retail and from 6 stores in 2012, the Delhi-based...