Company Update : V Mart Retail by Motilal Oswal Financial Services Ltd
Big beat on margins due to lower LR losses; EBITDA up 28% YoY
* Revenue grew 13% YoY to INR8.9b, driven by 1% blended SSSG and ~14% YoY store additions.
* V-Mart opened 15 new stores (10 in V-Mart and five in Unlimited) and closed two stores (one each in V-Mart and Unlimited), taking the total store count to 510 stores (V-Mart 421 and Unlimited 89).
* Blended SSSG moderation was driven by the shift in Eid dates to 4QFY25. Normalized for the same, SSSG would have been ~5%.
* Gross profit grew 13% YoY at INR3.1b (2% above), as gross margins expanded 10bp YoY to 35.3% (55bp beat).
* Employee expenses grew 13% YoY to INR950m.
* Other expenses declined 3% YoY to INR912m (10% below our estimate), driven by: i) 100bp decline in inventory provisions and ii) 100bp decline in A&P spends.
* Resultantly, EBITDA stood at INR1.3m (+28% YoY, 15% beat) with margins improving 165bp YoY to 14.3% (185bp beat).
* Depreciation increased 20% due to a change in lease accounting, while interest cost declined ~51% YoY.
* V-Mart reported PAT of INR336m (vs. our estimate of INR257m), led by higher EBITDA and lower finance costs.
* Pre-IND AS EBITDA grew 40% YoY to INR0.6b, with margin at 6.9% (up 130bp YoY).
Segmental performance
* V-Mart (core): Revenue grew 14% YoY to INR7.4b, driven by nine net store additions (up 14% YoY) and ~1% SSSG. V-Mart’s reported monthly SPSF was stable YoY at INR748. V-Mart format’s EBITDA grew 22% YoY to INR1.06b, as margin expanded ~100bp YoY to 14.4% driven by 90bp gross margin expansion.
* Unlimited: Revenue grew 11% YoY to INR1.4b, driven by four net store additions (up 14% YoY) and ~1% SSSG. Unlimited’s reported monthly SPSF grew ~5% YoY to INR603. Unlimited’s EBITDA grew 9% YoY to INR245m, as margin contracted ~30bp YoY to 17.7% due to ~70bp gross margin contraction.
* LimeRoad (LR): Commission income declined ~47% YoY to INR62m, while operating loss reduced ~55% YoY to INR46m (vs. INR68m QoQ, INR103m YoY), driven by a further reduction in advertisement spends.
Operational highlights
* Footfalls grew ~11% YoY to 20m, with conversions improving ~100bp YoY to 48%.
* Report monthly SPSF stood at INR 716 vs INR 711 in 1QFY25.
* Blended ASP declined ~1% YoY to INR218, driven by pricing rejig in Unlimited (- 6% YoY to INR396). Overall sales volume grew ~14% YoY.
* Blended ATV declined ~3% YoY to INR1,004, driven by 3%/5% YoY decline for VMart/Unlimited. Overall transactions grew ~16% YoY.
* Inventory position remained healthy at 93 days (vs. 99 days YoY), led by a sharp reduction in non-apparel inventory (98 days vs. 124 YoY).
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