(Rating: BUY, TP: Rs 2,400, Downside 4%)
- Our view - After the recent run-up, we believe some correction can be expected in the near term with underlying demand still exhibiting weakness, competition not reducing significantly and some pressure on margins expected with normalization of costs and yarn inflation. While the medium to long term outlook remains strong with V-Mart expected to gain market share and successfully scale up its presence in new geographies, current valuations look rich. We would suggest waiting for corrections for fresh entry in the stock. The upcoming equity fund raise can also lead to some correction. We maintain our estimates for now with a TP of Rs 2,400 based on 40x FY23E earnings.
- Demand outlook - Full recovery is still some time away for fashion consumption, could reach 84% of normal sales despite multiple tailwinds like good festive, winter and marriage season indicating some underlying weakness given smaller size of social gatherings and need-based buying; but don't see long term impact on demand.
- Margin outlook - Difficult to expand significantly as employee increments will be given and RM cost pressures will also increase given rising yarn and fabric prices.
- Store expansion - Will maintain long-term trajectory at annual increase of 20-25% in retail area.
Shares of V-MART RETAIL LTD. was last trading in BSE at Rs.2425 as compared to the previous close of Rs. 2496.25. The total number of shares traded during the day was 1063 in over 380 trades.
The stock hit an intraday high of Rs. 2503.05 and intraday low of 2358.5. The net turnover during the day was Rs. 2578655.