Broker’s Call: V-Mart (Buy)

| Updated on March 26, 2021

Yes Securities

Target: ₹3,089

CMP: ₹2,732.40

We conducted a round of channel checks on V-Mart Retail and other peers. The feedback is encouraging on the back of several initiatives taken by the management to drive recovery in footfalls.

While the recovery is shaping up well so far and should help the company get back to a positive trajectory in the fourth quarter, with footfalls recovering above 80 per cent for Q4 and above 90 per cent for March, the growing number of Covid-19 cases remains the key risk which can again impact store operations and footfalls.

The company is also very comfortable on the inventory levels and freshness with strong sales without aggressive discounting. Given liquidity issues for weaker peers, the company would have gained market share. V-Mart Retail is taking a 8-10 per cent price increase on fresh inventory from April to pass on the yarn inflation.

The recent QIP fund raise of ₹375 crore will be spent on setting up a new owned warehouse and aggressive omni-channel investments over the next 2-3 years which will improve supply chain efficiencies, take care of next 10-year requirements and improve their digital offerings.

We continue to believe that V-Mart remains a strong play on the value retail story with best-in-class operating metrics, solid execution, capable management and a strong balance sheet to support market share gains with limited threat of online competition. We reiterate a ‘Buy’ rating and increase our Target Price to ₹3,089 from ₹2,400 earlier.

Published on March 26, 2021

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