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    Buy V Mart Retail, target price Rs 1,932: Edelweiss

    Synopsis

    The analyst suggested a stoploss at Rs $stopLossL.

    Buy-Sell---ThinkStockThinkStock Photos


    Edelweiss has given a buy rating to V Mart Retail with a target price of Rs 1,932. The share price moved up by 2.93 per cent from its previous close of Rs 1748.75. The last traded stock price is Rs 1,800.

    According to the brokerage, V Mart Retail (V Mart) reported larger-than-expected declines of 3.4 per cent year on year in revenue and 63 per cent year on year in comparable EBITDA. Quarterly performance through March 15 was healthy (revenue/ same shop sales growth (SSSG) of 29 per cent/8 per cent year on year), but the lockdown dragged overall SSSG to 18 per cent year on year (notional sales loss of about Rs 750 million).

    The management expects revenue to pick up gradually (with 70 per cent stores having re-opened and witnessing 40 per cent footfall) and would not shy away from severe cost control (employee and rental costs). The brokerage believes V-Mart’s relatively strong balance sheet (about Rs 55 million in cash and Rs 1.5 billion of open bank funding lines) will hold it in good stead.

    Investment Rationale

    According to the brokerage, V-Mart’s mainstay—value retailing—should help it hold up in the face of cutback on large-ticket purchases by consumers.

    The brokerage believes VMart is a play on organised retail, largely in Uttar Pradesh, Bihar and North-East geographies. The company will be a key beneficiary of recovery in discretionary spending as well as a potential shift in the spending pattern from unorganised to organised retail chains. Furthermore, the improving share of private labels from around 70 per cent currently to potentially 75- 80 per cent will boost margin.
    V-Mart Retail-EdelweissJune182020
    Source: Edelweiss

    The brokerage expects competition to also refrain a bit from higher discounting looking at the industry dynamics and financial stress. VMart’s strategy of value retail should aid them in times when consumers cut back relatively on large ticket purchases. A strong balance sheet (compared with peers) is likely to keep competition at bay and may even help gain market share. The brokerage retains buy rating with a target price of Rs 1,932 (retain 45 times PE to non-Ind AS 116 FY22E EPS). The stock is trading at 38 times FY22E EPS (non-IND AS Rs 116 EPS).

    Financials

    For the quarter ended March 31, 2020, the company reported standalone sales of Rs 332.66 crore, down -40.82 per cent from last quarter sales of Rs 562.16 crore and down -3.44 per cent from last year's same quarter sales of Rs 344.53 crore. The company reported net profit after tax of Rs -8.44 crore in the latest quarter.

    Promoter/FII Holdings

    Promoters held 51.99 per cent stake in the company as of March 31, 2020, while FIIs held 23.49 per cent, DIIs 15.10 and public and others 9.42 per cent.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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