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MOSL: V-MART RETAIL (Buy)- Recovery in sight; poised for steady growth

V-MART RETAIL: Recovery in sight; poised for steady growth

(VMART IN, Mkt Cap USD0.9b, CMP INR3420, TP INR3920, 15% Upside, Buy)

 

• V-Mart Retail (VMART)’s revenue was up 2.3x YoY, 61% below pre-COVID levels (1QFY20). This is closer to other retailers’ performances, as the second COVID wave has seen lower impact. EBITDA loss at INR20m recovered 67% YoY (6% miss).
• Given the expectation of swift recovery from the second COVID wave lockdowns by 3QFY22, we raise our FY23E revenue/EBITDA estimates by 7%, factoring in a revenue/EBITDA CAGR of 12%/14% over FY20–23E. The recent acquisition announcement of the “Unlimited” Value Retail chain and aggressive store additions in core markets should drive steady growth – which may be well-supported by a lean balance sheet, supported by the recent QIP. Maintain Buy.

 

Rev at 61% below pre-COVID levels; EBITDA loss at INR20m (6% miss)

• V-Mart’s 1QFY22 revenues were up 2.3x YoY to INR1.7b (4.3% miss). However, revenues were down 61% v/s pre-COVID levels of 1QFY20. (ABFRL / Shoppers Stop / Trent were down by 63%/76%/57%).
• Gross margins remained stable YoY at 31% (+20bps YoY) and improved 120bps on a QoQ basis despite rising RM costs. This was attributable to a 19% increase in ASP on the back of a 5–6% price increase and a favorable mix of higher value products.