Vishal Mega Mart Has JPMorgan 'Overweight' On Wide Product Portfolio And More

JPMorgan remains bullish on Vishal Mega Mart Ltd. with a target price of Rs 126.43, due to factors like "wide product portfolio, strong own brand proposition (15-25% cheaper vs 3P) and formalisation tailwinds." These factors will ensure steady Same Stores Sales Growth led by volume, according to the brokerage.

Growth strategy for the retail major includes a clear roadmap for addition of the next 1,000+ stores (696 stores now); focus on facilitating consumer uptrading via consistent addition of higher price points while maintaining opening price point strength and increasing own brand salience (~73% now).

Gradual Ebitda margin expansion aided by operating leverage, own brand play coupled with hyperlocal delivery to enhance competitive position, and strong focus on productivity, working capital efficiency and talent build-out/incentivisation to protect financial and operating discipline, are also part of the strategy, JPMorgan said in its note.

The company's agenda to increase the number of stores, along with scope to deliver healthy SSSG will depend on catering to middle- and lower-income household aspirations at affordable price points, according to the brokerage.

"Cluster-based store additions ensure an efficient cost structure. VMM sees scope to add 1,000+ stores (vs 696 now)-150-200 stores in top 50 cities with 1million+ population (in 32 now) and 800+ stores in top 1,250 towns," stated the report. For this, the strongest fit is the Kerala market currently.

Additionally, ramping up hyperlocal delivery will help it compete with rivals, as per the brokerage, "Currently 650 stores offer 30-min delivery for free (for orders above Rs 299). This is expected to protect VMM's position against QC by offering convenience and value (own brands)."

Projections of working capital focus, consistent Ebitda margin expansion, talent management and retention has led JPMorgan to maintain 'overweight' on Vishal Mega Mart.