V-Mart Retail Ltd. share price target

V-Mart Retail (VMART) reported below-expected revenue growth of 20% YoY to Rs 3.1bn in Q2FY20, with SSSg of 1% (volumes 8%).

4 November 2019 After adopting an aggressive pricing strategy to tackle competitive pressure, VMART curtailed discounts in EOSS, which led to healthy revenue growth of 20% YoY to INR3.1b (in-line) and an improvement in the gross margin by 200bp YoY in 2QFY20. However, SSSG (+1% YoY) and volumes (-8% YoY) were muted in the quarter due to a 14% decline in footfall/sq.ft, even as ATP and transaction size improved by 16% YoY. Further, expenses related to new stores, marketing and logistics led to a net loss of INR106m, which was cushioned by tax credit from adoption of the new tax regime. For 1H, revenue/EBITDA stood at INR7.7b (+26% YoY)/INR316m (-24% YoY). (3) In 2QFY20, footfall per store declined by 4- 5% YoY and volumes were down 8% YoY due to weak consumer spending, potential competition from online and as new store are yet to realize full potential. V-Mart remains aggressive on store addition (+45/55 in FY20/21E), despite the slowdown in consumer spending.

On the back of rationalization of stores, (a net of 24 stores lesser in Tier II in comparison with Q4FY19), same store sales growth (SSSG) grew by 5.2% in Q1FY20 vs 1.2 percent in the same period in the last fiscal.

V-Mart Retail's (VMART) Q1FY20 revenue growth was in line at 26% YoY, with SSSg of 5.2%.

Healthy revenue growth but margins shrink in a weak market: Revenue grew 25% YoY to INR4.5b (8% beat), led by rapid store addition (+13 to 227) and high SSSG of 5.2% YoY (our estimate: +4.5%). That said, we note that the market environment was not very conducive, with higher RM cost (+31% YoY due to intense competition), contained product pricing and various promotional offers impacting the gross margin by 300bp. On a pre-Ind-AS 116 basis, EBITDA declined 9% YoY to INR393m (at INR578m on a post IndAs 116 basis), with the margin contracting sharply by 330bp YoY to 8.7%....

Mart posted a modest topline growth of 15.9% (yoy) last quarter, supported by same store sales growth of 4% and launch of 15 new stores. It has continued its focus on fashion, which constituted ~93% of Q4FY19 sales.. Although average selling price of apparel stood at Rs 334/$4.7 in Q4FY19 vs Rs 321/$5.0 in Q4FY18 (Rs 320/$4.6 for FY19 compared to Rs 323/$5.0 a year before), total average verage selling price remained flat yoy last...

Margins Drive Down Performance: Despite top line growth of 16%, margins were impacted on account of higher operating costs and increasing competition.

V-Mart Retail (VMART) reported below-expected Q4FY19 revenue growth of 16% YoY to Rs 3.4bn, with SSSg of 3.5%. Operating margins contracted 260bps YoY to 15.7%, resulting in EBITDA/PBT dropping 23%/29% YoY. Management has guided for ~25% area addition and operating margins of 9-9.5% in FY20. We scale back FY20/FY21 PAT estimates by 9%/3% given the muted margin guidance. Upon rollover to Mar'20, our target price...

Store Additions, Rebound in Footfalls Aid Q3FY19 Growth: Aggressive store additions from FY18 onwards and rebound in conversion rate aided in volume growth of 14% and same store sales growth (SSSG) of 11% in Q3FY19 leading to a revenue growth of 27% YoY to Rs. 4658 Mn.

Less number of weddings,, large base effect due to GST and reduction in average selling price of apparel Rs 264 ($3.9) in Q1FY19 vs Rs 269 ($4.2) in Q1FY18- translated to a restrained topline expansion up by 14.6% (yoy) last quarter, with sales per square feet declining by 4.5% (yoy) to Rs 874 ($13.0). Despite promotions, superior branding and wider merchandise, same store sales growth, both in value and volume terms, fell drastically to 1.2% and...