Vishal Mega Mart Ltd. has received a 'buy' rating from Motilal Oswal Financial Services Ltd. as the brokerage initiated coverage on the stock with a target price of Rs 165. The brokerage initiated coverage based on a DCF valuation, implying about 45 times Sep'27E EV/Ebitda.
The brokerage highlighted that the company is a unique Indian retailer with a strong presence in tier 2 cities and beyond, well-diversified exposure to key consumption baskets—apparel at 44% and general merchandise & fast moving consumer goods around 28%.
Vishal Mega Mart has a strong footprint of 696 stores across 458 cities spanning 30 states and Union Territories, with approximately 72% of its stores located in tier 2 cities and beyond.
The company also has a strong and affordable private brands portfolio at 73% revenue share and one of the lowest cost structures in the industry, it added. "Its private-labels in FMCG are sourced from reputed vendors such as Indo Nissin, Bikanerwala, and CCL Products and are priced at a significant discount to branded competitors," said the brokerage.
The brokerage believes VMM's uniqueness provides it with a strong moat against intense competition from both offline and online value retailers.
Motilal Oswal expects VMM to clock a revenue/EBITDA CAGR of 19%/20%, driven by approximately 13% CAGR in store additions, consistent double-digit SSSG, and modest operating leverage benefits.
The company has one of the leanest cost structures among Indian retailers, with a cost of retailing — including rentals — of Rs 1,800 per sq ft. "This enables VMM to offer the most competitive opening price points across several categories," the brokerage added.
Given VMM's debt-free balance sheet and robust cost controls, the brokerage expects approximately 24% PAT CAGR and cumulative pre-IND-AS OCF/FCF generation of around Rs 32 billion/Rs 23 billion over FY25-28.
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