Ambit said its previous ‘sell’ rating was due to valuations that left little room for error amid rising competition and market fragmentation.
However, the stock has corrected 30% ever since and the consensus EBITDA has seen only a modest downgrade of 2%, creating a clear disconnect and resetting expectations, Ambit said, adding that its estimates are largely unchanged since it initiated coverage on the stock.
The brokerage said Vishal Mega Mart stands out in India’s value retail landscape given its supply chain efficiencies enabling price leadership, supported by 70%-75% of own-brand mix and a wide assortment format. It said Vishal Mega Mart differentiates itself from its fashion-led peers via a diversified sales mix, with apparel forming 44% and FMCG and general merchandise forming 28% each of the overall sales.
This combination drives superior unit economies — 35% store return on capital employed (RoCE) — and lends visibility to its scale-up journey, Ambit said.
Ambit has retained its 16% and 21% revenue and earnings per share (EPS) compound annual growth rate (CAGR) estimates, respectively, over FY26-28.Ambit expects 16% revenue CAGR over FY26-28 compared to the 20% consensus, led by 14% retail area expansion and 8% same store sales growth, with store headroom of 1.5x the current network.
While the brokerage has maintained its target price on Vishal Mega Mart, the lower entry price improves the risk-reward for a business delivering consistent growth and high RoCE, it said.
The company’s diversified basket and price-led positioning also provides relative insulation from emerging disruption compared to more pure-play grocery retailers such as DMart, Ambit said.
It stated elevated raw material inflation and leadership transition as risks for the stock.
The brokerage prefers Trent over Vishal Mega Mart over DMart within the value retail segment, and has “sell” rating on the latter. Meanwhile, it prefers Titan, Trent, Nykaa and Vishal Mega Mart among its large and midcap “buy” recommendations, in that order.
Of the 15 analysts who have coverage on Vishal Mega Mart, 14 have a ‘buy’ rating and one has a ‘sell’ rating.
Shares of Vishal Mega Mart declined 3.4% to hit an intraday low of ₹98.8 apiece on Monday. The stock was down 2.8% at ₹99.46 apiece around 12.10 pm. It has declined 17.4% in the past month and 33.7% in the last six months.
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