Top Conviction Ideas : Buy V Mart Ltd for Target Rs. 900 - Axis Securities Ltd
Recommendation Rationale
* Resilient Performance: V-Mart reported 22% YoY revenue growth, and SSSG stood at 11% for both V-Mart and Unlimited stores. However, the quarter was impacted due to the temporary GST transitory, along with unseasonal rains in core Puja markets. Gross margin expanded 3 bps YoY to 33.6%, supported by planned liquidation and better realisation at the end of seasonal sales. EBITDA grew 85.2% YoY to Rs 72 Cr, with margin expansion of 302 bps to 8.9%, driven by improved gross margins and a 53% reduction in Lime Road losses.
* Expansion Strategy: V-Mart continued its aggressive retail expansion in Q2FY26, adding 17 new stores and 6 Unlimited outlets, taking the total store base to 533 (438 V-Mart and 95 Unlimited). The pace remained strong postquarter, with 16 additional stores opened by mid-Q3, raising the tally to 549 stores. Backed by steady execution and healthy traction across markets, management has marginally revised its full-year target upward, now guiding for around 75 new store additions in FY26.
* Positive Long-term View: V-Mart is well-placed to benefit from rural recovery and market share gains from unorganised players. Strong footfalls, disciplined cost control, and steady store expansion should aid performance, while the recent announcement on GST rate cut is likely to spur consumption and boost discretionary spending.
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