Vishal Mega Mart Ltd. share price target

We attended VMM’s analyst meet to assess progress on our thesis around the sustenance of double-digit SSG, long-term expansion opportunity, and retention of best-in-class ROIC.

Vishal Mega Mart (VMM) reported consolidated revenue growth of 18.7% YoY to ~INR 37bn, driven by 10% SSSG (samestore-sales growth) and continued store expansion.

Vishal Mega Mart (VMM IN) delivered a strong Q1FY27, with consolidated revenue up 18.7% YoY to Rs 37.3bn, 1% ahead of our estimate. Growth was led by 10% SSSG, ahead of our 8% estimate, supported by new customer additions, higher purchases by existing customers and continued scale up in hyperlocal delivery. Importantly, VMM maintained prices in its opening and mid-price portfolios despite inflation, which protected customer affordability and helped drive footfalls, volumes and SSSG. This reinforces VMM's ability to drive volume led growth while protecting affordability, a key differentiator in the value retail...

Vishal Mega Mart (VMM) delivered a robust 1QFY27, with revenue rising ~19% YoY, driven by a robust 10% adj. SSSG and ~11% YoY area addition. VMM’s pre-IND AS EBITDA margin expanded ~25bp YoY to 10.2 as higher gross margin (+30bp YoY) was partly offset by higher employee costs (minimum wage hikes in several states).

Vishal Mega Mart (VMM) delivered a resilient performance amid a partial shift in festive (to 2Q) with ~17% YoY revenue growth, led by 29 net store additions (+15% YoY) and ~7.5% adj. SSSG (vs. 12.8% in 2Q, ~210bp
adverse impact due to festive shift to 2Q).

We met Gunender Kapur, Investor CEO - Vishal Mega Mart (VMM), to assess the progress on our thesis around sustenance of double-digit SSG, 2.5x expansion opportunity, and retention of best-in-class RoIC (~40%) for VMM.

Management remains optimistic about sustaining double-digit SSSG on an annual basis (quarterly deviations might happen due to a change in the festive season, etc.) for a fairly long period, driven by differentiated own brands portfolio (~75% of the revenue mix).

High confidence on Kerala TAM opening up in a material way was one of the major takeaways from our meeting with GK. Strong traction in Kerala with a ~100-store opportunity; entry in Tamil Nadu will be in a phased manner to protect store economics.

Vishal Mega Mart (VMM) delivered another strong quarter, with ~22% YoY revenue growth, led by 25 net store additions (+15% YoY) and robust ~12.8% adjusted SSSG, benefiting from an early festive season.

VMM sustained its strong growth momentum (+22.4% YoY revenue growth), driven by 12.8% SSSG and healthy retail area expansion. Profitability surprised us positively, driven by better revenue mix (higher apparel sales), operational efficiencies and operating leverage.

Vishal Mega Mart (VMM) is one of India’s largest offline-first value retailers, catering to a population of ~1b across the middle- and low-income segments.

Vishal Mega Mart’s (VMM) private label strategy in FMCG (~27% of revenue) has been important for its success story, redefining value for consumers. High presence of large-pack SKUs and reputed manufacturers for its private label brands.

Issue Snapshot: Issue Open: December 11 December 13, 2024 Price Band: Rs. 74 78 *Issue Size: Up to Rs 8000 cr (Entirely Offer for sale) Reservation for: QIB upto 50% eq sh Non-Institutional alteast 15% eq sh ((including 1/3rd for applications between Rs.2 lakhs to Rs.10 lakhs)) Retail alteast 35% eq sh Face Value: Rs 10 Book value: Rs 13.14 (September 30, 2024) Bid size: - 190 equity shares and in multiples thereof 100% Book built Issue IPO Note - Vishal Mega Mart Limited

We believe that the IPO is fairly priced and recommend a “Subscribe-Long term” rating to the IPO.