Target: ₹180
CMP: ₹150.50
We initiate coverage on Vishal Mega Mart (VMM) with Buy and Sep-26E TP of ₹180 (65x P/E).
VMM is driving a quick shift from unorganised channels, led by best-possible affordability with high share (about 73 per cent) of own brands. VMM has a large catalogue at opening price-points and offers 30-40 per cent better pricing for quality aspirational products which reflects in its best-in-class SSG (12-14 per cent in FY23-25).
With leading RoIC (2x peers’) and strong value proposition, VMM has unleashed expansion, with ~4x scale-up over FY17-25 (nearly 17 per cent CAGR). Aided by a large TAM of $430 billion (around 10 per cent CAGR) and set unit metrics, we see strong potential for 5x/7x revenue/EBITDA scale-up in the coming decade (17-22 per cent CAGR).
Such growth should be led by 2.5x scale-up of retail space, near-doubling of throughput, and gradual margin gain. We believe the GST-cut-driven demand uplift will add to the current momentum and drive better revenue/EBITDA CAGR of 20/26 per cent over FY25-28E vs Street belief of 18/22 per cent.
Key risks: TP multiple demands sustained execution with limited scope for disappointment; TAM expansion with strong balance sheet is an upside.