V-Mart Retail Limited: Research Report

Stock Data

Ticker- VMART

Exchange- NSE

Industry- Retail

Price Performance

Last 5 days- (-0.76%)

YTD- (-26.05%)

Last 12 Months- (-28.9%)

Why the Slump:

• COVID induced lockdowns had restricted the consumer’s mobility. This hugely impacted V Mart’s bottom line. 
• Along with that, rising competition has dampened the footfall growth. 
• Grim short term demand outlook due to inflationary pressures.

Events to watch out for:

• Earnings Release for the June Quarter on August 5th
• Intimation of Opening Stores

Company Description:

V-Mart is a family clothing retailer that offers its customers affordable fashion apparel and kirana products. The firm mainly runs the chain of “Value Retail” department shops in tier II and tier III cities. UP and Bihar have the highest business concentration, generating 65 to 70 percent of the top line.

Peer Comparison Chart:

Company Name	P/E	P/S	P/BV
V-Mart Retail	464.40	3.24	6.36
Vedant Fashions	86.14	26.33	24.50
Metro Brands	82.51	13.00	13.80
Avenue Supermarts	133.33	7.59	19.88
Trent	1207.26	10.06	19.13

Research Summary

The largest concentration of business comes from UP & Bihar. The rise of inflation has led to a rise in cotton prices which the retailer has passed on to the consumer, which affects the volume of sales. Along with that, inflationary pressures have eroded the common man’s disposable income, resulting in decreased sales for the firm.

(₹ mn.)	Q4FY22	Q4FY21	YoY (%)
Total Revenue	4,588	3,519	30.4
Total Expenditure	4,085	3,220	26.8
EBITDA Margin (%)	11	8.5	249bps
Profit After Tax	(26)	(15)	–

Earnings had taken a hit during the pandemic. The profitability seems to be recovering but they still have a long way to go to reach pre pandemic levels of profitability.

The Unlimited Acquisition has accelerated the growth of V Mart. The acquisition seems to be an intelligent move by the firm. The Unlimited stores produce higher margins in the short term and most of these stores are situated in Tier 1 cities, unlike V Mart stores which focus more on Tier 2 and Tier 3 towns which is beneficial for the firm as Tier 1 cities have been less susceptible to the falls of Inflation.

The long term growth prospects of the company seems to paint a brighter picture. The inflation in cotton prices might also cool down, as hinted by the Managing Director of the firm, Mr. Lalit Agarwal in the Q4 earnings call last fiscal period.

“Moderation in commodity price hikes is expected to bring some respite to macro stability indicators. Building on the moderation in commodity prices and swifter correction in domestic food prices, we see the near-term inflation trajectory improving.”

– Morgan Stanley Research, 2022.

 India is set to be the fastest growing economy while all other major global economies have shown recessionary trends coupled with the stabilisation in Inflation trajectory, this will result in the gradual increase in disposable income for the lower income group. Therefore, resulting in sales growth for the firm in the longer term.

With the price rises being passed on to the consumer. The company has taken the initiative to come up with numerous schemes and promotional measures for lower price point products in order to retain its consumer  base.

Along with that, to expand their footprint in India, the firm has opened 11 new stores in the June quarter FY 2022-23. Bringing the total number of stores to 391.  

Our View:

V-Mart Retail Limited is currently trading at a discount considering its long term growth prospects. It provides exposure to the Indian Retail Industry, which shows strong signs of growth in the future. The post pandemic environment combined with stabilising inflation paints a bright picture for the firm in the long run. The future growth plan seems to be in safe hands considering the fact that the company has no long term borrowings while possessing a steady cash reserve.