Manyavar Q2 Results Review - SSSG Below Expectations; Demand Outlook Healthy: ICICI Securities

ICICI Securities Report

Vedant Fashions Ltd.’s (Manyavar) Q2 FY23 Ebitda at Rs 1.2 billion (up 27% YoY) was a tad below consensus expectations. Revenue at Rs 2.5 billion grew 24% YoY (low base).

Customer revenue was ~Rs 29 billion implying up 20% YoY and 20% three-year compound annual growth rate. Same-store sales growth was 4.1% YoY. It added 23 stores (16 shop-in-shop and seven exclusive brand outlets) on net basis in Q2 FY23, taking the total to 626 stores globally and 612 stores in India.

Management is guiding for store expansion of ~16% CAGR over next two-three years. First-mover advantage, scale efficiencies and no discounts on Manyavar drives higher gross margin (~75% on end-customer sales) versus most other listed brands (which operate at 45-60%).

This, in our view, is the key differentiation enjoyed by Vedant Fshions versus peers, which in turn results in higher profitability (more than 30% Ebitda margins pre-Ind Accounting Standard 116), more than 40% return on invested capital /return on capital employed and superior free cash flow generation.

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