V-Mart Retail – Growing Value Retailer

V-Mart

V-Mart Retail Limited (“V-Mart” or the “Company”) is a retail store chain, offering fashion apparel, footwear, home furnishings, general merchandise, and kirana.

Primarily focusing on Tier II and III cities, V-Mart has 258 stores in 189 cities across 19 states.

The Company follows the concept of value retailing. Operating on the key guiding principle of Price “Less” Fashion, the Company caters to the ‘aspiring class’ and ‘middle class’ demographics, with added focus on youth and young families.

The Company’s stores, located over a total retail area of 20 Lakhs sq. ft. in prime states/UTs such as Bihar, Chandigarh, Gujarat, Haryana, Jammu and Kashmir, Madhya Pradesh, New Delhi, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh.

The Company provides a vast range of products, including apparels, home furnishings, footwear, kirana and general merchandise, all under one roof.

Cluster Based Approach – The Company ensures that all new locations are strategically placed within a 50-150 km radius from an existing city.

Asset Light Model – As a strategic initiative, the Company rent stores on long-term leases instead of getting saddled with expensive real estate, capex that would have compromised scalability and/or led to high debt burden.

Particulars

FY15

FY16

FY17

FY18

FY19

Revenue (In Rs. Cr.)

720.50

809.38

1,001.73

1,222.37

1,433.74

Growth

12%

24%

22%

17%

EBITDA (In Rs. Cr.)

64.06

62.14

84.76

132.78

132.92

EBITDA Margin

9%

8%

8%

11%

9%

EBIT (In Rs. Cr.)

59.49

43.13

66.21

109.85

105.29

EBIT Margin

8.26%

5.33%

6.61%

8.99%

7.34%

PBT (In Rs. Cr.)

57.07

41.07

66.82

112.47

99.81

PAT (In Rs. Cr.)

37.37

27.63

43.90

77.70

61.63

PAT Margin

5%

3%

4%

6%

4%

EPS (In Rs.)

20.78

15.31

24.22

42.79

33.90

EPS Growth Rate

-26%

58%

77%

-21%

Historic P/E (Closing Price of 31st March)

27.33

30.71

34.05

44.40

79.22

CURRENT P/E (based on price of 22nd Jan– Rs. 1910.05)

85.88

D/E

0.15

0.12

0.13

0.00

0.00

Interest Coverage

14.86

19.98

24.08

86.78

82.56

ROCE

27.25%

24.12%

27.74%

38.18%

32.47%

ROE

18.23%

11.98%

16.26%

22.36%

15.06%

Peer Comparison

V-MartComparative Analysis

 

D-Mart

Future Retail

V-Mart Retail

No. of shares

(31st Dec 2019)

62.78 Cr.

50.26 Cr.

1.82 Cr.

Closing Price (22nd Jan)

Rs. 1,914.70

Rs. 342.25

Rs. 1,910.05

Market Cap

(In Rs. Cr.)

1,20,200.02

17,201.43

3,467.79

Shareholder funds (In Rs. Cr.)

5,587.45

3,846.37

409.27

Minority Interest (In Rs. Cr.)

0.56

0.28

0.00

Debt (In Rs. Cr.)

429.82

2,553.98

0.03

Cash (In Rs. Cr.)

219.07

255.82

16.59

Enterprise Value (In Rs. Cr.)

1,20,411.33

19,499.87

3,451.23

EV/EBITDA (x)

57.80

10.39

21.54

EV/Revenue (x)

5.09

0.92

2.19

P/E (x)

98.65

24.78

85.88

Number of stores

196

293*

258

Enterprise Value/ Stores (In Rs. Cr.)

614.34

66.55

13.38

Turnover/ Stores (p.a.) (In Rs. Cr.)

120.80

72.49

6.11

WHAT’S DRIVING THE STOCK?

V-Mart is amongst the largest Value Fashion mass retailers and has developed several private label brands like Flick, Twist, Kidistan & Charcoal. The Company is also taking several initiatives towards enhancing its Value Fashion capabilities by focusing on widening product portfolio.

Wide Geographic Presence And Diversified Product Offerings Across Various Segments

The Company has an operational portfolio of 258 stores as on December 31, 2019, spread across 19 states/union territories. Moreover, the Company has a diversified product profile comprising apparels, non-apparels and kirana (limited to a few stores).

Asset Light Model

As a strategic initiative, the Company rent stores on long-term leases instead of getting saddled with expensive real estate, capex that would have compromised scalability and/or led to high debt burden.

Management Guidance

The Company is targeting a three-times jump in revenue over the next five years, implying ~25% CAGR. To achieve this, it has:

  • Divided the business in to four geographical zones;
  • Appointed dedicated managers for various functions;
  • Invested in building IT infrastructure;
  • Accelerated store expansion pace (opened 43 stores in FY19 and has guided 60 for FY20);
  • Bolstered supply chain

WHAT’S DRAGGING THE STOCK?

Expensive Valuation

Intense Competition

The Company faces stiff competition owing to the presence of numerous players in the unorganised segment along with competition from various organised players in the brick-and-mortar and online segments.

Threat from Online Retail Websites like Grofers, BigBasket, Amazon pantry in the food & grocery categories, Amazon, Myntra, Jabong in the apparels categories.