V-Mart primarily operate in Tier-II and Tier-III cities with a chain of value retail departmental stores offering apparels general merchandise and kirana catering to the entire family. Based in New Delhi its operations are spread across northern western and eastern parts of India.
The stock of V-Mart Retail rallied 125% in past year as compared to 16% rise in the S&P BSE Sensex. In past five years, it zoomed 1403% from Rs 160 against 76% surge in the benchmark index. The company made a stock market debut in February 2013, by allotting equity shares at price of Rs 200 per share.
Currently, the market capitalisation of V-Mart Retail stood at Rs 42.19 billion against Rs 2.87 billion as on May 16, 2013.
Since February 13, post October-December quarter (Q3FY18) results, the stock rallied 27% against 5% gain in the Sensex.
The net profit of the company increased by 27% over the same quarter last year on lower interest cost because of healthy cash flow. EBITDA (Earnings before interest, tax, depreciation and amortization) increased by 30%, whereas EBITDA Margin expanded 240 basis points on YoY basis on the back of reduction in shrinkages and slight reduction in promotions which resulted in full price selling rather than discounting the products.
Analyst at Stewart & Mackertich Wealth Management initiates V-Mart Retail with a BUY rating and 12 month target price of Rs 2,554.
“The gap between growing aspirations, increasing disposable incomes and low organized retail penetration in the rural market are the USPs on which the company is building its business model. This has resulted in a healthy Same-store-sales-growth (SSSG) over the last few years. We believe that the untapped rural market, increasing share in private labels and Goods and Services Tax (GST)-led benefits are the major tailwinds in driving the company northward”, Abhishek Roy, analyst at brokerage firm said in a note.
V-Mart Retail posted net revenue CAGR of 20% over FY2014-FY2017. We expect the company to generate topline/bottom-line at 22%/41% CAGR over FY17-FY20E by opening new stores with a focus in tier II and below cities. Increasing aspirations and rapid urbanization will help in better SSSG and in turn helping rise in revenue per sq ft, it added.
Both EBITDA and PAT margins are likely to expand on the back of an increase in sale in private labels. At present, private labels share is 54% and the management is hopeful to increase it to 80% over the next few years. They have already shifted their focus to high-margin fashion segment from low-margin kirana as the contribution has dropped significantly to 7% from 19% over FY2013-FY2017, analyst said.
The board of directors of V-Mart Retail is scheduled to meet on Thursday, May 24, 2018, to approve the audited financial results of the Company for the fourth quarter and year ended on 31st March, 2018 and to recommend the dividend, if any for the financial year 2017-18.