Sell Lenskart, Says Ambit — 'Fantastic Brand But Tough Math'

Lenskart which is to list on Monday has received its first sell rating. Ambit has initiated coverage with a target price of Rs 337, implying a 16% downside from the current market price of Rs 402.

While acknowledging Lenskart’s strong brand and growth prospects, the brokerage believes that the company’s capital-intensive business model, muted return ratios, and stretched valuations make the risk-reward unattractive at current levels.

Ambit notes that Lenskart’s made-to-order eyewear model demands significant capital investment, keeping returns muted despite healthy growth. The firm expects free cash flow to turn positive only by fiscal 2028, weighed down by a planned Rs 2,000 crore capex over fiscal 2025–2028.

With utilisation levels at around 65%, well below peers’ 80%, scaling up operations will require steady investment in capacity and infrastructure. This, coupled with goodwill from acquisitions such as Owndays and Stellio, leaves the balance sheet asset-heavy and restricts capital efficiency.

Lenskart is expected to deliver around 20% revenue CAGR over financial year 2025–2028, led by continued expansion in India and growing global presence through brands like Meller and Owndays. The company’s store count is projected to rise at a 17% CAGR, supported by higher productivity from organised market share gains.

Margins are also set to improve, driven by operating leverage and better store maturity. Ambit estimates Ebitda margin expansion of about 630 basis points (pre-IND AS 116) over fiscal 2025–2028.

However, despite these gains, return ratios remain subdued, with RoCE at around 9% and RoIC at 13% — far below peers such as Trent and Nykaa, which deliver 35–40%.

At the current price, Lenskart trades at an implied ~55× FY28E EV/Ebitda for its India business — about 20–30% higher than Trent and Nykaa’s BPC divisions. Ambit argues that such rich valuations are unwarranted, given Lenskart’s lower profitability and capital returns.

The report also highlights that the current valuation already discounts an aggressive 18% two-decade revenue CAGR, assuming Lenskart achieves around 60% of EssilorLuxottica’s retail market share, which the brokerage calls overly optimistic.