Company Update : Vishal Mega Mart Ltd by Motilal Oswal Financial Services Ltd
Yet another strong quarter with 20%+ growth and margin expansion
2QFY26 consolidated revenue at INR29.8b grew 22% YoY (our est. +21% YoY), driven by ~12.8% adj. SSSG (vs. 11.4% in 1Q).
* Among key categories, Apparel revenue grew 25% YoY, followed by 23%/18% YoY growth in GM/FMCG.
* Revenue from private labels grew ~26% YoY, while third-party brands’ revenue grew ~14% YoY.
* Driven by the shift in Pujo to 2Q, east markets significantly outperformed, with salience rising to ~32% (vs. 25% contribution to VMM’s store count).
* VMM added 25 net new stores (28 openings, 3 closures) in 2Q, bringing the total store count to 742 in 493 cities (19/33 cities added in 2Q/1H) with total retail areas of ~12.8m sqft (up ~11% YoY).
* Store addition was skewed toward South with 15 net store additions in 2Q.
* Gross profit at INR8.4b grew ~23% YoY as gross margin expanded ~5bp YoY to 28.3%, driven by a higher share of higher-margin Apparel (up ~95bp YoY, FMCG down ~105bp YoY) and increase in private label mix (up 200bp YoY to 73.5%).
* Employee/other expenses increased 16%/17% YoY.
* Reported EBITDA rose ~32% YoY to INR3.95b (~5% beat) as reported EBITDA margin expanded ~80bp YoY to 13.2%, driven by operating leverage.
* Pre-IndAS 116 EBITDA (pre-ESOP charges) grew ~34% YoY to INR2.5b, with EBITDA margin expanding ~80bp YoY to 8.5%.
* Reported PAT at INR1.5b (8% beat) rose ~47% YoY, driven primarily by higher EBITDA.
* Adjusted PAT (pre-ESOP charges) came in at INR1.6b (up 39% YoY) with margin expanding 60bp YoY to 5.4%.
1HFY26 results: Healthy 20%+ growth with margin expansion
* Consolidated revenue at INR61.2b grew ~22% YoY, driven by ~12.1% adj. SSSG and ~11% store area additions.
* Revenue from private labels grew 25% YoY, while third-party brands’ revenue was up ~14% YoY.
* Among key categories, GM revenue grew ~23% YoY, followed by 22%/19% growth for Apparel/ FMCG.
* VMM added 46 net new stores (51 opened, 5 closures) in 1H.
* Gross profit at INR17.3b grew ~22% YoY as gross margin expanded 10bp YoY to 28.3%.
* Share of apparel inched up ~25bp YoY to 44.9%, while GM rose ~35bp YoY to 28.2%.
* Revenue contribution from own brands increased ~185bp YoY to ~74.7%.
* Reported EBITDA at INR8.5b was up ~28% YoY as margin expanded ~67bp YoY to 13.9%, driven by operating leverage.
* Pre-IndAS 116 EBITDA (pre-ESOP charges) grew ~34% YoY to INR5.8b, with EBITDA margin expanding ~80bp YoY to 9.4%.
* Reported PAT surged 41% YoY, driven by robust EBITDA growth and higher other income (up 78% YoY).
* Adjusted PAT (pre-ESOP charges) came in at INR3.8b (up ~39% YoY) with margins expanding ~80bp YoY to 6.2%.
Balance sheet and cash flow:
* Core working days inched up to ~5 (vs. -6 YoY), driven largely by a reduction in payable days to 62 (vs. ~75 YoY).
* OCF (post leases and interest) declined to INR4.9b (vs. INR7.3b YoY), due to unfavorable working capital movements.
* Capex stood at ~INR1.4b (vs. INR1.17b YoY), leading to lower FCF generation of INR3.5b (vs. INR6b YoY).
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