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Aditya Vision (AVL), a consumer-durable retailer, holds leadership share of over 50% in Bihar/Jharkhand, aided by low penetration so far, curated assortment, competitive pricing, Buy & Win scheme, and impeccable service/consumer trust. AVL has passed the litmus test of scale and is now a well-oiled machine to pursue the 5x expansion opportunity in six states of the Hindi Heartland. SSG should remain above 20% in the near term, led by maturing of new stores and low penetration. AVL’s payback period of under 3yrs is ‘better-than-the-best’ in other retail formats. We expect AVL to post a strong, revenue-led EBITDA CAGR of over 30% during FY23-27E and in the mid-teens over FY27-35E. Maturing of new stores should lead to better asset sweating and allied ROIC gains (1,000bps+ in FY23-27E). Despite better growth prospects, valuation at 35x 1YF is at 35-50% discount to retail peers’ and provides scope for re-rating. We initiate coverage on AVL with BUY and Dec-24E TP of Rs5,000 (40x Dec-25 EPS).

Low penetration to effect industry CAGR of ~15% in Bihar vs. ~10% in India

Consumer durable penetration in India is the lowest in Bihar (over 15% for AC/Ref vs. India avg. of 24-38%). In our view, penetration is low due to inferior power availability and product accessibility. But ease of financing, about 3x CAGR growth in Bihar’s percapita power consumption vs. Pan-India (FY12-22), and higher disposable income with free food-grain schemes have greatly improved accessibility and should drive strong midteen industry CAGR in Bihar (vs. ~10% in India). [Note: FY27E/35E penetration estimate for Bihar is conservative; does not even factor in current India-level penetration.]

Foray into remaining Hindi Heartland provides a 5x expansion opportunity

AVL focuses on making in-roads in adjacent regions of UP (East), MP, Chhattisgarh, WB (border regions), along with fortressing the existing Bihar/Jharkhand regions. Combined, the targeted Hindi Heartland has a large population base of ~450mn vs. 170mn for Bihar & Jharkhand jointly; also, the presence of other organized chains is limited in these regions. With broader tailwinds, AVL would leverage its well-oiled business machinery to 5x its FY23 store-count of 105 by FY35E, thus granting confidence for long-term growth.

Best-in-class model: under 3-yr paybacks; even better-than-the-best retailers’

Consumer-durable retail is a unique business model, wherein success is contingent on scale, cost structure and support from OEMs, as gross margin is in the low 10-15% range. AVL stands out on most parameters, as it has crossed the crucial scale barrier, has an asset-light & low-cost model, and has due support from brands, w.r.t. shared employees, marketing costs, and capital expenses for creating new markets. With a payback period of under 3 years, AVL outshines the best retailers across categories (Exhibit 5).

Major valuation gap; apt candidate for rerating, in line with earnings delivery

AVL would clock over 30% EBITDA CAGR during FY23-27E, higher than most bestperforming retailers’. Despite better prospects, AVL trades at a steep 35-50% discount to our coverage stocks, which is unwarranted, and delivery per our estimate should lead to its continued re-rating. Given higher concentration in Bihar and entry into new regions, we conservatively value AVL at 40x its Dec-25 EPS; recommend BUY (TP: Rs5,000/sh).

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