Nomura has initiated its coverage for eyewear player Lenskart Solutions Ltd. with a 'buy' rating and a target price of Rs 888, implying an upside of nearly 40% from its last closing price.
The brokerage believes that Lenskart is one stock to "keep for generations", citing factors that work in the company's favour such as an broadly untapped Indian market, global expansion ambition, and a healthy balance sheet.
Nomura said that eyewear is bought way less than required in India, with two thirds of the population people ignoring their need for a correction.
Lenskart achieved a lot of milestones in an evironment where trade was fragmented by introducing centralised manufacturing, remote optometry, and an asset-light store that opens almost anywhere, according to Nomura.
ALSO READ: GDP Data, Crude Oil Prices Key Factors To Drive Stock Markets This Week, Say Analysts
In addition to the proven track record, the path ahead also appears credible in light of an over 10,000 store headroom across more than 6,000 pincodes of which only 5% is walked.
"The road further extends to international geographies (scale-up in existing and entering new ones), keeping it on track to become a global leader. Above this lies the untapped pool of margin improvement through scale and better mix (progressive lenses)," Nomura stated.
The brokerage underlined that Lenskart is capturing entire value chain to capitalise on its scalable, hard-to-repeat business model.
"Service systems keep trust alive after purchase which enhances Net Promoter Score, and creates a pull effect for the brand in a push category, in our view," Nomura noted.
Further, it pointed out that Lenskart has barely scratched the surface of its overseas markets, and doubts about profitability have now faded.
Every international market sits on a different potential, as per Nomura, with Singapore Singapore leading in organised prescription eyewear; UAE - established; Japan and Thailand scaling on Owndays' base; and Saudi Arab in investment mode.
"Lenskart is chasing a INR1.7tn addressable opportunity with a part of its India model (GeolQ, remote optometry, centralized manufacturing, omnichannel) being replicated, while product, pricing, store format and marketing being rebuilt locally," Nomura underscored.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
