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* Value fashion retailers witnessed a broad-based recovery in same-store sales growth (SSSG) in 4QFY26, driven by a shift from unorganized to organized, resilient consumption trends in Tier II/III cities and tailwinds from GST rationalization.

* Coupled with aggressive store expansion (retail area +20% YoY), aggregate revenue growth for value fashion retailers accelerated to ~28% YoY in 4QFY26 and ~26% YoY in FY26.

* Profitability improved significantly with ~54% YoY growth in aggregate pre-IND AS EBITDA, driven by operating leverage benefits, despite a moderation in gross margin. For FY26, aggregate pre-IND AS EBITDA margin expanded ~95bp YoY, leading to ~40% YoY growth in pre-IND AS EBITDA.

* Our channel checks indicate that demand momentum remained intact in the first half of 1QFY27; however, Adhikmaas (from mid-May) and the lack of wedding days have led to slight moderation in demand.

* Input cost inflation, minimum wage hikes and potential subdued monsoon remain the key near-term monitorables. However, potential downtrading amid inflationary pressure on household budgets and a continued shift from unorganized to organized retailers amid a rising footprint of value fashion retail in tier 2+ towns could be the key medium-term growth triggers.

* Reiterate our BUY ratings on V-Mart (TP: INR900) and VMM (TP: INR160).

Broad-based acceleration in store additions; long runway for growth

* Store expansion remained a key growth driver in FY26, with the four listed value fashion retailers adding ~360+ net stores, taking the aggregate network to ~1,960 stores (+23% YoY).

* Expansion was supported by a healthy demand environment and market share gains from the unorganized retailers, leading to better productivity of new stores.

* Growth remained broad-based across core and newer markets, with retailers deepening their presence in North and East India while scaling up the footprint in South and West India. V2 (area up 70%) and BSR (up 30%) led expansion, while VMM and V-Mart also delivered strong additions and closed the year at or above the upper end of their initial guidance.

* Store economics remain healthy despite accelerated rollouts, with new stores ramping up faster and newer geographies delivering productivity comparable to mature markets.

* FY27 expansion plans remain robust, with all four retailers targeting another year of healthy area growth, supported by strong balance sheets, internal accruals and confidence in long-term consumption trends.

* With limited overlap in the current footprint of listed value fashion retailers (~60% of ~800 unique towns have a presence of just one of these four value retailers), we believe there is a long runway for accelerated store expansion to continue.

Valuation and view

* Value fashion continues to outperform the premium and branded apparel retailers, underpinned by structural tailwinds:

(i) Rising aspirations in Tier 2/3/4 cities,

(ii) An accelerating shift from unorganized to organized channels,

(iii) Deeper private label penetration driving assortment depth

(iv) Aggressive network expansion.

* We remain bullish on the growth prospects of value fashion retailers, driven by the massive opportunity from the unorganized-to-organized shift and rising preference for shopping from one-stop family shops in Tier 2 and beyond cities.

* We reiterate our BUY rating on VMM (TP INR160) and V-Mart (TP INR900), given the robust growth outlook (17-19% FY26-28 revenue CAGR) and improving profitability (~23% FY26-28 pre-IND AS EBITDA CAGR).

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