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 Retail’s top management and visit to its Gurugram warehouse reinforce conviction in the company’s 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-Mart’s 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 format’s potential underpins V-Mart’s aggressive store opening guidance of 50-60 per annum over the next two years. V-Mart’s strategy of increasing clusters coupled with healthy store additions is likely to drive growth and garner market share gains.