V-Mart Retail - Company Update - BUY - YES Securities

Strong balance sheet to drive share gains; valuations rich but still a good 2-3 year buy

CMP (Rs) 2,690, 12m Target (Rs) 3,089, Upside 15%

We conducted a round of channel checks on V-Mart Retail and other peers. The feedback is encouraging on the back of several initiatives taken by the management to drive recovery in footfalls. While the recovery is shaping up well so far and should help the company get back to positive trajectory in 4Q with footfalls recovering above 80% for 4Q and above 90% for March , the growing number of COVID cases remains the key risk which can again impact store operations and footfalls. The company is also very comfortable on the inventory levels and freshness with strong sales without aggressive discounting. Given liquidity issues for weaker peers, the company would have gained market share. The company is taking a 8-10% price increase on fresh inventory from April to pass on the yarn inflation. The recent QIP fund raise of Rs 3.75bn will be spent on setting up a new owned warehouse and aggressive omni-channel investments over the next 2-3 years which will improve supply chain efficiencies, take care of next 10 year requirements and improve their digital offerings. The 25% annual footprint expansion will be comfortably funded from internal accruals. We adjust our EPS estimates to build in the QIP dilution. We continue to believe that VMART remains a strong play on the value retail story with best-in-class operating metrics, solid execution, capable management and a strong balance sheet to support market share gains with limited threat of online competition. We reiterate BUY rating and increase our TP to Rs 3,089 from Rs 2,400 earlier based on 55x FY23E P/E (18x FY23E EV/EBITDA).

Shares of V-MART RETAIL LTD. was last trading in BSE at Rs.2701.65 as compared to the previous close of Rs. 2711.9. The total number of shares traded during the day was 709 in over 229 trades.

The stock hit an intraday high of Rs. 2731.35 and intraday low of 2614.75. The net turnover during the day was Rs. 1912148.

Source : Equity Bulls

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