V-Mart Gets 'Buy' Upgrade From HDFC Securities, Says Risk-Reward Turning Favorable

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HDFC Securities Institutional Equities

V-Mart Retail Ltd.’s recovery momentum from an unfavourable rural cycle and past capital allocation stumbles remains on track.

1. Footfall/sales densities continue to inch back to normalcy,

2. rental bills are getting re-calibrated downwards,

3. working capital pain is alleviating, and

4. initial attempts of increasing consumer wallet share (by introducing new categories) are encouraging and likely to improve sales density further.

Against this backdrop, the 35% stock price correction (since Sep-24) seems overdone (stock now available at 21x FY27 EV/itda). The ask from growth and profitability remains modest. We bake in 15% revenue CAGR over FY25-27E and 6.4% Ebitdam respectively. This implies the core operations hitting ~7% Ebitdam by FY27; meaningfully lower than the >9% delivered in FY19.

We upgrade the stock to Buy (earlier Reduce) with a DCF-based target price of Rs 3,500/share (implying 25 times FY27 EV/Ebitda).

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