Buy V2 Retail Ltd for the Target Rs. 2,014 by Axis Securities Ltd
Investment Rationale
* Strong Expansion Momentum: V2 Retail has maintained a consistent pace of store expansion over the past three years, with growth gaining further momentum in FY25. As per Q4FY25 pre-quarter update store count stood at 189 stores added 72 new stores in FY25 on net basis. Looking ahead, the company plans to open 90-100 new stores in FY26, with a continued focus on Tier 2, 3, and 4 cities, where rising demand for value fashion offers substantial growth potential.
* Streamlining Product Strategy: V2 Retail has revamped its product planning and pricing strategy by prioritising pre-season procurement to improve inventory management and reduce overstock risks. The company has eliminated premium price points in key categories such as men’s denim and t-shirts, reinforcing its focus on affordability. This approach is aimed at enhancing its value proposition and strengthening its appeal among budget-conscious consumers in its core markets.
* Impressive SSSG performance: V2 Retail reported strong same-store sales growth of 24% in Q4FY25 and 29% in FY25, underscoring its effective execution in offering trend-driven, quality merchandise. This performance has been supported by strategic initiatives such as an optimised product mix, enhanced inventory efficiency, and increased reliance on planned ordering. The company also reported sales per square foot of Rs 1,017 in FY25 vs Rs 854 in FY24 (Rs 494 in FY22) driven primarily by improved space utilisation and SKU rationalisation.
* Outlook: The company is positioning itself as a prominent pan-India retail player, driven by aggressive store expansion and steady improvement in same-store sales growth (SSSG) over the coming quarters. Management remains confident of achieving a 50% revenue growth over the next 3–4 years, supported by robust internal initiatives and a positive demand environment for value fashion. This is expected to translate into margin expansion and enhanced store-level efficiency. Given the successful turnaround and strong growth visibility, we forecast Revenue and EBITDA to grow at a CAGR of 45% and 103%, respectively, over FY24–FY27E, with EBITDA margins likely to sustain in the 14–16% range in the near term.
Valuation & Analyst recommendation
* Considering the company’s promising growth outlook, we recommend a BUY on the stock with a potential upside of 10% from the CMP.
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SEBI Registration number is INZ000161633
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