Buy This Retail Stock With A Target Price of Rs 5120 Says ICICI Direct

ICICI Direct has a buy call on the stock of V-Mart with a target price of Rs 5120 resulting in a gain of 23% in 12 months from the current market price of Rs 4,242. However, at the time when the brokerage had set the buy rating for the stock, it was trading at a price of Rs 4175 at the NSE. V-Mart is a major retail company in India, and the Ministry of Textiles, Government of India, awarded the firm the Transforming India Through Retail award for Transforming lives in Tier II and III cities in 2019. According to the brokerage The company exhibited strong revenue traction with V-Mart recording 100% revenue recovery on Q2FY20 base (excluding Unlimited format). On a favourable base, revenue grew 93% YoY to Rs 338 crore. Newly acquired 74 Unlimited Stores in September contributed 6.9% to sales. Better gross margins and positive operating leverage resulted in V-Mart reporting EBITDA margins of 6.1% vs. a loss of Rs 0.4 crore in Q2FY21. The base quarter had a higher other income (Rs 15 crore in Q2FY21 vs. Rs 4 crore in Q2FY22) owing to rental waivers. Subsequently, net loss was at Rs 19.4 crore vs. Rs 25.6 crore in Q2FY21 said ICICI Direct in its research report.Advertisement We like V-Mart as a structural long term story to play the unorganised to modern retail shift. We pencil in revenue, EBITDA CAGR of 46%, 51%, respectively, in FY21-24E (on favourable base).The recent acquisition of Unlimited store brand (74 stores) will enable V-Mart to cater to the fashion needs in western and southern markets of India (where V-Mart has minimal presence).We expect total retail space to increase at ~19% CAGR in FY21-24E with a total area of 3.8 million square feet by FY24E (excluding Unlimited stores).Robust liquidity position (Rs 155 crore as on Q2FY22) to fund store capex requirements and set up new integrated warehousing facility. According to the brokerage V-Mart, having over the years built its fortress in non-tier I cities is well poised to capture market share in the growing ~| 2.5 trillion value fashion industry. The company, over the last two years, has expanded its reach in the interior parts of the country by opening stores in tier IV cities (~12% of total stores). ICICI Direct has said in its research report that V-Mart has been a consistent compounder with stock price appreciating at 45% CAGR in the last five years. We maintain BUY recommendation on the stock. We value V-Mart at Rs 5120 i.e. 22x FY24E EV/EBITDA. The above stock is picked from the brokerage report of ICICI Direct. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.