Nuvama Initiates 'Buy' On Electronics Mart, Aditya Vision Citing Effective Growth Strategies

Nuvama Institutional Equities has initiated a 'buy' coverage on Electronics Mart India Ltd. and Aditya Vision Ltd. as the two companies are pursuing divergent growth strategies targeting distinct and non-overlapping markets.

The brokerage has a target price of Rs 237 per share for Electronics Mart, an upside of 38% from the previous close, while Aditya Vision got Rs 672 apiece target, implying a 36% upside.

India's consumer durables industry presents a unique paradox, analysts at Nuvama said in a note. "While it is a massive market, the industry is heavily reliant on regional distribution chains."

There are regional gems in the sector with enviable store economics, Nuvama said. "Our channel checks indicate competition in electronics retailing is very localised and that it is difficult to dethrone an incumbent."

The emergence of new products, rapid maturation of categories, changing price points and product replacement build a case for an informed buying experience and strong after-sales support, the note said, making a positive case for consumer spending.

The risk of inventory obsolescence in consumer electronics is among the lowest across retail sectors, it said. Demand slowdown, excessive competition, and growing influence of online retailing are among the major downside risks.

Below is the key rationale behind Nuvama's 'buy' initiation on Electronics Mart and Aditya Vision.

• The brokerage initiated 'buy' with a target price of Rs 237 per share, an upside of 38% from previous close.

• Scale-up in Delhi-NCR region with highest consumption of air conditioners.

• The company's robust cash flow in Telangana and Andhra Pradesh give it ample dry powder to execute its NCR strategy.

• Targets a larger market with a longer investment horizon.

• Proven ability to squeeze out maximum profitability from lower sales throughput.

• Leveraging incentive income to drive profitability as revenues surge.

• The brokerage initiated with 'buy' rating and a target price of Rs 672 apiece, a 36% upside.

• Rising electrification is fostering penetration of CE in tier-2 and below towns.

• The company is replicating its successful Bihar model across Hindi-heartland states.

• It is expanding the pool of financing options and availability, accelerating adoption.

• Better unit economics than small store retailers is aiding the company gain edge in market.