V-Mart - An Under-Earning Asset Or A Melting Ice Cube? HDFC Securities' Analysis

HDFC Securities Institutional Equities

Against the backdrop of limited immediate competition and an improving rural cycle, V-Mart Retail Ltd. resembles a momentarily under-earning asset more than a melting ice cube. Hence, risk reward seems favorable @ 20 times December-25 enterprise value/Ebitda.

We build in sales/Ebitda compound annual growth rate of (17/36% CAGR) over FY23-26 (base case) and upgrade V-Mart to a 'Buy' rating with a discounted cash flow-based target price of Rs 2,550/share (earlier 1,850/share); implying 23 times FY26 EV/Ebitda (FY25/26 Ebitda changes by +21/+7% respectively).

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