ICICI Direct's research report on V-Mart
V-Mart, having over the years built its fortress in non-tier I cities, is well poised to capture market share in the growing ~Rs 2.5 trillion value fashion industry. The company enjoys strong moats that would provide an edge over increasing competition in tier III-IV regions. We like V-Mart owing to its a) immaculate record of high revenue growth trajectory (revenue CAGR: 23% in FY13-20), b) higher cash conversion model (CFO/EBITDA: ~60%), c) stringent working capital cycle (average NWC days: 50), d) capital efficient business model RoCE: ~25%. The recent QIP worth Rs 375 crore would further strengthen balance sheet with proceeds being utilised in meeting long term supply chain infrastructure needs by setting up a new warehouse.
Outlook
We expect EBITDA margins to remain range bound at ~9% (pre-Ind-AS) as the company focuses on enhancing market share by passing on the benefits on margin. We initiate coverage on the stock with a BUY recommendation and target price of Rs 3500 (20x FY23E EV/EBITDA).
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