V-Mart Retail Ltd. share price target

V-Mart’s Q4FY23 result continues to be tepid. Its revenue performance has been decent (at 8% vs 12% retail expansion 4Y CAGR, 80% revenue share). In Unlimited, we like the relative outperformance in new stores (vs the acquired ones) led by strategic interventions such as: (1) Smaller size stores at ~8,000 sqft (vs 10,000 sqft acquired stores), (2) lower ASP (-7% YoY FY23), (3) high focus on tier-3 cities (75% stores added in tier-3 cities in FY23).

We recommend a BUY with a near-term TP of Rs 2,360/share, implying an upside of 10% from the CMP.

Recommendation With a 25% upside potential from the CMP, we maintain our BUY rating on the stock.

Result has been unexciting; pressure on SSSG (due to late winter), declining margins due to (1) raw material cost pressure, (2) value repositioning (launch of sharp price points) and (3) ~150bps impact of online-platform cash-burn (on EBITDA margin) have been concerning. Positively, incremental store addition in South India (of Unlimited) is tracking well (similar revenue psf as VMART).

We maintain a BUY rating on the stock with an unchanged TP of Rs 3,500, implying an upside of 24% from the CMP

V-MART’s Q2FY23 EBITDA at Rs536mn, up 2.6x YoY (attributable to low base due to covid-induced restrictions), was above consensus estimates. Gross margin expanded 560bps YoY led by likely lower discounts and consistent performance of Unlimited stores.