Edelweiss Securities has given a buy recommendation on V-Mart Retail with a target price of Rs 2,476.Shares of V-Mart Retail traded at Rs 2,055.2 around 10:45 am on 16 July, 2019.
The brokerage has set a one-year horizon for the stock to hit the target price.
"Our recent interaction with V-Mart Retails top management and visit to its Gurugram warehouse reinforce conviction in the companys bright prospects," said the brokerage.
With an eye on 3 times revenue spurt over FY19-23E, V-Mart has accelerated store expansion pace, inducted professional management, invested in latest IT infrastructure and automated warehousing and supply chain, the brokerage added.
The brokerage believes these equip V-Mart to capture higher share of the burgeoning value retailing opportunity.
"Post our downgrade to hold, the stock has corrected more than 25 per cent and the risk-reward is now favourable," said the brokerage.
In the light of V-Marts superior revenue growth potential (FY19-21: more than 20 per cent CAGR), time-tested execution prowess and best-in-class ROCE (nearly 30 per cent versus nearly 20 per cent industry average), we upgrade the stock to buy, added the brokerage.
"Retaining 25 times 12 months forward EV/Ebitda, our revised target price comes to Rs 2,476 (earlier Rs 2,503)," said the brokerage.While regional competition is waning due to players inability to tackle liquidity crunch, lower-than-desired sales per square feet and elevated working capital cycle, a few national apparel retailers do pose threat.
However, the brokerage believes, considering the moat and positioning of each player as well as the industry size, V-Mart will remain a relevant player.
Moreover, strong conviction in value retailing formats potential underpins V-Marts aggressive store opening guidance of 50-60 per annum over the next two years.V-Marts strategy of increasing clusters coupled with healthy store additions is likely to drive growth and garner market share gains.