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HDFC Securities Report
Risk-reward favorable:
According to HDFC Securities Institutional Equities, the performance of core V-Mart Retail Ltd. stores remains steady, while Unlimited's turnaround seems decisively in play.
Balance sheet remains better protected against macro-headwinds relative to peers.
Hence, the brokerage remains constructive on the name with a DCF-based targe price of Rs 850/share (implying 21x FY28 P/E).
Investment rationale:
Core vitals (KPIs) remain steady. Demand momentum continues as summer offtake remains healthy (per channel checks). Mid-to-high single digit same-store-sales growth guidance for FY26 stays (9M FY26 3%).
The underpinnings of growth remain-
- a steady core V-Mart (~15% revenue CAGR penciled in);
- a step-up in Unlimited's network expansion (added 18 stores in the past six quarters vs a muted FY23-24) along with steady improvement in unit economics (format is now estimated to be at 4-5% pre-INDAS EBITDAM vs 1-2% for legacy stores).
Note: Limeroad losses remain inconsequential. The 75-store addition guidance in FY26 stays (upside risk here). However, what gives the brokerage more comfort on V-Mart is not just the healthy KPIs but its risk management and relative insulation from potential macro shocks vs peers.
Most value retailers benefited from a buoyant macro environment over FY23-25, with sales productivity gains coming alongside rising inventory needs (higher inventory/sq. ft).
However, V-Mart continued to gain sales/Ebitda productivity while keeping inventory needs in check. This makes it more resilient to inventory cycle shocks in an unfavorable macro environment. Against this backdrop, the 6M ~30% stock price correction seems overdone (stock now available at <13x FY28 EV/EBITDA/<18x FY28 P/E).
The ask from growth and profitability remains modest. HDFC Securities bakes in ~16% revenue CAGR and ~40bps margin expansion over FY26-28E (from 6% in FY26 to 6.4% in FY28). The brokerage maintain Buy with a DCF-based target price of Rs 850/share (implying 21x FY28 EV/EBITDA). Note: FY27/28 Ebitda estimates largely unchanged.
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