Recovery in core markets remains weak. VML's Tamil Nadu execution is key. However, the anemic cash position of TN-focused peers could offer a benign competitive environment for Sail Silk (Kalamandir) to gain share in TN.
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We recently interacted with Sail Silk (Kalamandir) Ltd.'s management. Key takes were:
Competitive intensity in core markets (Andhra Pradesh/Telangana) has inched up. However, management highlighted that these are momentary bursts of aggression in terms of discounts and are likely to taper off. The team is also taking initiatives to spur up sales density in these catchments;
VML store expansion (in Tamil Nadu) short of a couple of delays remains on track; however, sales density hasn't yet caught up to format average. This typically takes two-three wedding seasons to mature in terms of throughput.
Sail Silk format's performance remains a sore point (especially the Men's and Kid's wear categories). Most of the pain seems captured in valuations (~9x FY27 P/E; <5x FY27 EV/Ebitda). However, the street isn't capturing the revenue ramp-up expected from sales density improvement of the recently-added stores (11 stores added since Sep-23).
We largely maintain our Buy rating with a DCF-based target price of 270/share (implying 17 times FY27 P/E).
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