Buy Lenskart Ltd for the Target Rs 705 by Motilal Oswal Financial Services Ltd
Growth momentum and margin expansion sustain
* Lenskart sustained growth momentum in 1QFY27, with in-line 34% YoY consol. revenue growth, driven by healthy volume growth (25% YoY) and premiumization (ASP up ~6.5%). India business remained resilient, led by robust SSSG (18%) and continued store additions, while international business (29% YoY cc growth) delivered another strong quarter.
* Profitability continued to outpace revenue growth, with pre-IndAS EBITDA doubling YoY and margin expanding ~420bp to 13.3% (+45bp QoQ, 15bp beat), supported by product-margin expansion and operating leverage.
* The growth runway remains intact with strong SSSG (despite rising store density) and significant whitespace across India. International business is also approaching an acceleration phase as technology and supply-chain integration improve, supporting runway for further network expansion.
* The addressable market is widening at both ends, with premiumization exceeding expectations and the INR500 value proposition now becoming economically viable, creating incremental growth levers.
* Cash generation is improving alongside earnings, with OCF of INR3b funding INR2.3b of store and plant capex, while ROCE improved to 23%.
* We raise our product margin assumptions by ~50bp for FY27/28E, led by ramp-up in inhouse frame manufacturing, resulting in ~4-5% upgrades in our FY27-28E pre-IndAS EBITDA.
* We model 25%/41%/50% CAGR in revenue/pre-IndAS EBITDA/adj. PAT over FY26-28E, driven by ~25% revenue CAGR in both India and International. We expect pre-IND AS EBITDA margin to expand to 18.5%/12.5% in India/International by FY29.
* We reiterate BUY with a revised TP of INR705, based on 48x Sep’28E blended pre-IndAS EBITDA.
Key highlights from the management commentary
* India’s growth runway remains strong, with 18.3% SSSG and 24% same-PINcode growth despite rising store density. With 6,100+ unserved PIN codes and ~3,000+ stores densification opportunities, the key constraint is improving access, ramping up eye-testing capacity, finding right talent and not demand.
* The addressable market is expanding at both ends, with premium products at 20% of sales and significant whitespace in premium and progressive lenses, while the INR500 proposition is now economically viable. Better manufacturing, supply-chain integration and omnichannel acquisition should support growth without compromising unit economics.
* International business has scaled up well, with ~38% volume growth and preIndAS EBITDA margin rising to 10.6%. Market strategies remain differentiated, with Singapore validating the dual-brand model (>25% volume share), Thailand nearing acceleration, mature markets such as Japan delivering better economics, and potential entry into markets such as South Korea.
* Margin expansion, scale and backward integration remain the key earnings levers. Product margins are benefiting from localization and supply-chain integration despite currency headwinds, while AI/remote eye testing, GeoIQ and branded-lens manufacturing can improve scalability. The key execution monitorable is maintaining customer experience, talent and organizational agility as the network expands.
Valuation and view
* Lenskart has built strong moats in a difficult-to-scale category through -
i) a centralized, highly automated manufacturing facility and logistics network
ii) strong backward integration, which provides significant cost advantage
iii) large omnichannel presence
iv) leveraging technology to ease constraints in scaling up
v) house-of-brands architecture spanning mass to premium eyewear, to achieve its goal of making quality eyewear accessible and affordable. Please refer our IC for detailed thesis on Lenskart.
* We raise our product margin assumptions by ~50bp for FY27/28E, led by rampup in inhouse frame manufacturing, resulting in ~4-5% upgrades in our FY27-28E pre-IndAS EBITDA.
* We model 25%/41%/50% CAGR in revenue/pre-IndAS EBITDA/adj. PAT over FY26-28E, driven by ~25% revenue CAGR in both India and International. We expect pre-IND AS EBITDA margin to expand to 18.5%/12.5% in India/International by FY29.
* We reiterate BUY with a revised TP of INR705, based on 48x Sep’28E blended pre-IndAS EBITDA.
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