Shares of Vishal Mega Mart will be in focus on Wednesday, April 15 after HDFC Securities initiated 'Buy' coverage on the stock, mentioning the company balanced mix of products, with private labels contributing nearly three-fourths of revenue, supporting margins and pricing. The brokerage has set a target price of Rs 130, marking a 14% from the current price of Rs 114.
In comparison to its peers, which derive 90-100% of their revenue from apparel or groceries, Vishal Mega Mart has a highly diversified category mix. In FY25, apparel remained the largest contributor constituting 44% of revenue, followed by general merchandise and FMCG goods with a revenue share of 28% each.
The company's model uses high-frequency FMCG good as a key to boost daily footfalls, while selling higher-margin apparel and GM portfolio to captive shoppers. Apparel continues to anchor the sales, however, FMCG has been the primary growth driver, posting 28.4% CAGR over FY22-25. HDFC Securities expects that the category mix will largely remain stable over FY26-28.
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Vishal Mega Mart's business model converts high footfalls into high transaction volumes through its aggressive Opening Price Point strategy, giving the lowest entry-level prices to capture unorganised retail demand, the brokerage said. This is done private-label ecosystem that contributed 75% of revenue for nine months of FY26.
Through the 100% private label model in apparel, 70% in general merchandise, and 35% in FMCG, the company prices its own brand at 10-50% discount compared to other national brands. It must be noted that the Opening Price Point strategy drives initial customer acquisition, which is capped at 10-20% of store inventory.
Meanwhile, Vishal Mega Mart's high FMCG mix dilutes its general merchandise profile in relation to most value apparel retailers, the company bridges this gap via operational leverage to be the lowest cost retailer among peers.
In terms presence, the retail chain operates 793 stores spanning 519 towns across India at the end of FY26, with tier 2 and beyond cities comprising 74.5% of the mix.
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