V-Mart Retail Ltd. share price target

Moving from Rural to Urban: V-Mart has gradually been shifting its reach from smaller to bigger cities and towards higher value retailing.

1) Strong execution, 2. Insulation from an online onslaught and 3) inherent advantage within the ecosystem given the tail's precarious working capital position makes VMART our top pick in apparel retail. We revise our DCF-based TP upwards to Rs. 2,500/sh (earlier Rs. 2,150/sh). Revision is a function of 1. DCF roll-over to FY22, 2. 3/7% increase in FY21/22 EBITDA estimates to factor in better gross margins given the focus on full-price sell-through/fresh merchandise. V-MART continues to track strong growth, albeit expansion-led. SSSG print remains uninspiring (1%). What surprised us positively were higher margins, low SSSG notwithstanding. 1. Clockwork-like execution, 2. Higher full price sell-through, 3. Better merchandise sourcing margins courtesy vendor consolidation underpinned margin expansion. Store expansion remains tactical in existing Tier 1/2 catchments to tighten supply chain costs and in catchments with struggling peers (credit cycles running up for the latter) to gain market share.

V-Mart Retail (VMART) reported below-expected Q3FY20 revenue growth of 21% YoY to Rs 5.6bn, with SSSg of 1%.

6 February 2020 V-Mart recorded a strong sales/PAT growth of 21%/58% YoY (7% beat) in 3QFY20 amidst weak 2% SSSG due to the poor macro outlook, subdued festive season and muted pre-winter sales. However, we raise our FY20/FY21 EBITDA estimate by 14%/11%, on the back of its steady pace of store additions and strong cost optimization initiatives driving margin improvement. However, given the weak economic outlook and the stocks recent sharp rally, we maintain V-Marts revenues for 3QFY20 were up 21% YoY to INR5.6b (7% above est.), despite a weak economic environment and slowing consumer spending. Gross margin improved by 80bp YoY to 36.3%, led by supplier consolidation and efficient merchandise sourcing. Pre Ind-AS116, EBITDA was up 29% YoY to INR944m (16% beat), led by EBITDA margin improvement of 16.8% (up 100bp YoY). PAT at INR661m was up 58% YoY (22% beat), driven by higher sales and improving margins.

without the adjustment, operating loss would have been to the tune of Rs 7.87 crs/$1.1m (vs loss of Rs 3.86 crs/$0.6m in Q2FY19). Higher depreciation expense and finance cost due to lease rental adjustment dented PBT (loss of Rs 22.88 crs/$3.3m vs loss of Rs 9.68 crs/$1.4m...

Store additions continue to be mainly focussed on Tier I and sale of higher value products set the theme for Q2FY20.

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%.