MOSL: V-MART RETAIL (Neutral)-High opex, slowing SSSG/footfall drag profitability
-MART RETAIL: High opex, slowing SSSG/footfall drag profitability
(VMART IN, Mkt Cap USD0.5b, CMP INR1893, TP INR1880, 1% Downside, Neutral)
- Hurt by low SSSG, higher opex: 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 loss of INR79m at the EBITDA level (our estimate: INR5m). VMART incurred 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).
- Concall highlights: (1) V-Mart targets store adds of 60+ in FY20 and increase the count by 25% in FY21. EBITDA margin guided at 8-8.5% for FY20. (2) The company has planned capex of ~INR1000m in FY20 toward stores, inventory, warehouse and technology. (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. (4) 2Q debt was at INR750m directed to meet WC requirements.
V-Mart Retail Limited retails readymade garments and accessories. The Company is engaged in value retailing through the chain of stores situated at various places in India. It operates through Retail Sales segment. It offers products across three verticals, which include apparel, general merchandise (non-apparel and home mart) and kirana bazaar. It provides a range of apparels and accessories for men, women, boys, girls and toddlers. Its general merchandise includes footwear, home furnishing, kitchenware, toys and games, bags and luggage, and crockery. Its kirana bazaar includes fast moving consumer goods (FMCG) products, packaged food items, beauty and personal care, home care and staple products. It operates through over 120 stores across approximately 110 cities in over 10 states and union territories. Its stores are located in states/cities, including Chandigarh, Gujarat, Haryana, Jammu and Kashmir, Madhya Pradesh, New Delhi, Punjab, Rajasthan and Uttar Pradesh.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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