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ICICI Securities Report
We have cut our FY24-25E Ebitda estimates of V-Mart Retail Ltd. by ~4% due to slower than expected pick-up in rural demand, End-of-season-sale stress, and investments required (long gestation turnaround) in LimeRoad. We model revenue / Ebitda compound annual growth rate of 17 / 27 over FY23-25E.
We maintain 'Add' rating on the stock with a revised discounted cash flow-based target price of Rs 2,200 (earlier Rs 2,550).
Key downside risks:
Raw material costs turning inflationary, increase in competitive intensity from online/offline players.
We met the management of V-Mart. Takeaways:
Business recovery in rural continues to be soft, V-Mart is on a strong footing to capture the potential revival in consumption during H2 FY24; it expects retail expansion to be healthy at 15% in FY24 and same-store sales growth to be higher than 4-5% during H2 FY24,
Unlimited's business is on track to drive improvement in profitability of the existing 20% stores that are Ebitda negative (pre-IND Accounting Standard), with new stores' performance being equivalent to V-Mart,
LimeRoad is aiming to breakeven by the end of FY25 with thrust on expanding V-Mart's total addressable market beyond value retail segment.
Overall, while V-Mart continues to deliver on revenue (14% CAGR during FY19-23), delivery on profitability (trailing twelve months net loss at Rs 500 million) would be a key monitorable.
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