Top 3 reasons why Emkay is upbeat on Vishal Mega Mart; initiates with 'Buy'

Domestic brokerage firm Emkay has initiated coverage on Vishal Mega Mart (VMM) stock with a ‘Buy’ rating, on the back of strong growth potential, best-in-class returns, and an attractive value proposition.

 

“We initiate coverage on Vishal Mega Mart (VMM) with ‘Buy’ and Sep-26E target price (TP) of ₹180 (65x P/E). VMM is driving a quick shift from unorganised channels, led by best-possible affordability with a high share (~73 per cent) of own brands,” said Devanshu Bansal, research analyst at Emkay.

 

The company’s large catalogue at entry-level price points, combined with 30-40 per cent better pricing for quality aspirational products, has translated into best-in-class same-store growth (SSG) of 12-14 per cent over FY23-25. 

 

 

Supported by leading returns on invested capital (RoIC) at twice peer levels, the company has scaled nearly fourfold over FY17-25 (~17 per cent CAGR).

 

Analysts at Emkay see potential for a ‘5x/7x revenue/Ebitda scale-up in the coming decade’ (17-22 per cent CAGR), driven by a 2.5x expansion in retail space, near-doubling of throughput, and gradual margin improvement. 

Here are three reasons why Emkay is bullish on Vishal Mega Mart:

Variety and accessibility moats drive better SSG; South/West offers expansion scope

 

Vishal Mega Mart’s growth is less capital-intensive, with a sizable portion coming from SSG, Emkay analysts noted. Best-in-class growth is supported by new product/category extensions, loyalty programmes, Q-Com ramp-up, and unique private-label offerings, which together provide a strong consumer value proposition.   ALSO READ | Jyoti CNC Automation newly rated 'Buy' at Yes Sec; 18% upside seen 

Analysts believe GST cuts could further improve SSG trends. The company’s presence remains under-indexed in the South and West (<30 per cent revenue mix versus ~60 per cent for the industry), offering a 2.5x scale-up opportunity. Initial traction in Karnataka (~12 per cent revenue mix) reinforces confidence in replicating this growth elsewhere.

Best-in-class return metrics to fund growth internally

 

Vishal Mega Mart boasts a pre-tax RoIC of ~40 per cent (twice peers), driven by high private-label penetration, an agile supply chain, and disciplined cost management. Despite a lease-based model, Ebitda margins stand at 9 per cent, outperforming DMart (7.5-8 per cent) and other value retailers (6-8 per cent). Asset turnover is 1.5-2.5x peers, reflecting an asset-light model and operational efficiency.  ALSO READ | Marico eyes 30% Q2 revenue surge on price hikes; margin pressure temporary

Continued outperformance supports potential re-rating

 

Among large discretionary retailers, Vishal Mega Mart offers the highest potential with ~26 per cent Ebitda CAGR in FY25-28E, compared with 20-25 per cent for Titan, DMart, and Trent. Its current 1YF P/E of ~70x is slightly below DMart/Trent but above Titan. 

 

Analysts value Vishal Mega Mart at 65x, building in high-teen growth over the next decade alongside a strong RoIC profile. However, they caution that sustained macro weakness or slower expansion could trigger de-rating.