Buy Lenskart Solutions Ltd for the Target Rs. 625 by Emkay Global Financial Services Ltd
We retain BUY on Lenskart, while increasing our TP by ~4% to Rs625 (56x Mar28E EBITDA) from Rs600, as earnings see a 5% raise. Lenskart delivered a strong Q4 performance, with all-around beat of ~10% vs street’s/our estimates. In our view, Lenskart’s flywheel is gaining momentum as free eye tests are bringing in new customers (~25% volume growth in FY26), the loyalty program is driving repeat purchases, and vertical integration is aiding EBITDA margin expansion. The India business delivered best-in-class topline growth of ~33% in FY26, led by ~21% SSG. International business growth stood at ~30% in FY26, allaying concerns around likely slower growth in the segment. Lenskart’s inorganic foray with Meller (sunglass segment) and launch of smart eyewear 'B' are also making better than expected progress. Store additions remained healthy at 183/603 in Q4/FY26. Lenskart targets similar addition in FY27. Despite the macro volatility and accelerated expansion, India/International EBITDA margin expanded by ~450/350bps to 14/7%, respectively, in FY26, largely helped by operating leverage. Gross margin was stable in FY26, as the benefit of the vertical integration/premiumization was offset by rupee depreciation. With AI at the core, Lenskart continues to target a long-term steady-state margin of ~25%. Notably, Lenskart funded its entire expansion and manufacturing investments in FY26 via internal accruals. Net cash balance stood at ~Rs40bn, providing incremental growth optionality.
Strong all-around beat in Q4; expects FY27 store-adds to be akin to FY26 levels
Lenskart delivered another strong quarterly performance in Q4. Revenue rose ~41% YoY to Rs25.2bn, led by robust volume growth (~25%) with the rest via store additions. India business grew ~44% YoY, supported by a strong ~24% SSG. Growth was broad-based across Metro, Tier 1, and Tier 2+ markets. Consolidated volume growth remained healthy at ~25% YoY, aided by 45% increase in eye tests (6.8/23.8mn in Q4/FY26; 50% firsttime exams in India). Lenskart added 183 net new stores in Q4 (India: 170; International: 13), with FY26 additions aggregating to 603 stores (vs 335 in FY25). In Q4, >50% of store adds in India were in Tier 2+ cities. While the net new store additions in FY27 are expected to be similar to FY26 levels, the company highlighted that incremental store-addition potential for Lenskart’s stores in India is more than the 4,500 stores identified earlier. Consolidated EBITDA grew ~61% YoY to Rs5.4bn, with margin expanding by 270bps YoY to 21.3%; India pre-IndAS margin reached 15.3% (up by 630bps YoY), led by operating leverage.
Vertical integration to cushion cost headwinds
The company has not seen any meaningful impact from higher freight and raw material (RM) costs so far, though rupee depreciation on imports remains a headwind. To mitigate this, the company remains focused on vertical integration, with upcoming facilities such as the Hyderabad plant (expected to be commissioned in ~18 months) and the Thailand JV with Sunrise aimed at reducing import dependence and managing raw material costs more effectively.
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