Vishal Mega Mart rises 2%; Motilal Oswal sees further 20% upside potential

Vishal Mega Mart share price rose 2 per cent on Wednesday, registering an intraday high at ₹140 per share on BSE; Motilal Oswal initiates 'Buy'

Vishal Mega Mart shares rose 2 per cent on Wednesday, registering an intraday high at ₹140 per share on BSE. However, in the afternoon deal, at 12:40 PM, Vishal Mega Mart share price was trading 0.04 per cent higher at ₹1,37.1 per share on the BSE. In comparison, the BSE Sensex was up 0.05 per cent at 82,614.39. The company's market capitalisation stood at ₹63,907.39 crore. 

 

The 52-week high of the stock was at ₹140.45 per share and the 52-week low of the stock was at ₹96.05 per share. 

Motilal Oswal initiates coverage on Vishal Mega Mart 

The domestic brokerage has initiated coverage on Vishal Mega Mart with a 'Buy' call and has set the target at ₹165 per share, translating to an upside of 20 per cent from the previous close at ₹137.05 per share on BSE.   Track Stock Market LIVE Updates

 

The brokearge is bullish on the company for the following reasons: 

Strong presence in tier 2+ cities

Vishal Mega Mart's retail footprint spans 696 stores over 12m sq ft across 458 cities. It operates a big-box retail format, with an average store size of ~17.5k sqft. During FY22-24, the company added 55 net stores annually. However, the pace of store additions has accelerated, with 85 net stores added in FY25.

 

Further, the company’s efficient working capital management, superior cost controls, and disciplined asset-light approach, according to Motilal Oswal, have enabled strong store economics with 15 per cent pre-IND-AS Earnings before interest, tax, depreciation and amortisation (Ebitda) margin at the store level, over 50 per cent return on capital employed (RoCE), and a payback period of fewer than two years. 

 

Well-diversified portfolio

The company boasts a well-diversified category mix with over 25 per cent revenue contribution from three major categories—Apparel, FMCG, and General Merchandise (GM). 

 

Its diversified category mix makes it a one-stop destination for the entire family, expanding its total addressable market (TAM) and driving higher wallet share among consumers.

 

Caters to ₹70 trillion worth opportunity

Vishal Mega Mart is one of India’s largest offline-first value retailers, catering to a population of 1 billion across the middle- and low-income segments. It serves a substantial market valued at ₹70 trillion, which is likely to reach ₹100 trillion by CY28. 

 

Outlook 

Motilal Oswal expects the company to post a revenue/Ebitda compound annual growth rate (CAGR) of 19 percent/20 per cent, driven by 13 per cent CAGR in store additions, consistent double-digit SSSG, and modest operating leverage benefits. 

 

Given the company's debt-free balance sheet, robust cost controls, and tight working capital management, it expects 24 per cent profit after tax (PAT) CAGR. Over FY25-28, Vishal Mega Mart is forecasted to generate a cumulative OCF/FCF of ₹3,200 crore/ ₹2,300 crore, which should enable accelerated store expansions.