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Shares of V-Mart Retail witnessed decent traction on May 27 as the stock rose more than 5 percent in intraday trade.

The retail player announced its March quarter earnings on May 25 and in the following session on May 26, the stock ended 0.16 percent lower. The stock, however, seems to have recovered, supported by positive reviews from brokerages.

V-Mart reported a net loss of ₹2.61 crore for the period ended March 31, 2022 as against a net loss of ₹1.47 crore for the same period last year.

The company reported a total income of ₹461.57 crore during Q4FY22 as compared to ₹356.22 crore during the same quarter last year.

<h2>Brokerages largely positive</h2>ICICI Securities has maintained a 'buy' call on the stock with a target price of ₹4,150, slightly lower than the previous target price of ₹4,300.

The brokerage firm said V-Mart’s Q4FY22 EBITDA at ₹50.3 crore, up 50 percent year-on-year (YoY), was above the consensus estimates.

Gross margin expanded 512 bps YoY led by fresher inventory, lower discounts and higher gross margin contribution from Unlimited stores. Coupled with cost control and operating leverage, EBITDA margin expanded 143bps YoY despite the high fixed cost structure of Unlimited stores.

ICICI Securities highlighted that the company's revenue grew 30 percent YoY and 10 percent above the pre-covid level led by a good festive season. It added net six stores in Q4FY22, taking the total store count to 380 stores.

"Management indicted currently 'Unlimited' stores are generating positive EBITDA and they would continue with brand 'Unlimited' in the South after extensive customer survey. It plans to offer sharper price point, better quality fabric, improved assortment, introducing its own private labels and targets to improve footfall/volume growth and productivity of the stores over the next two-three years," said ICICI Securities.

Another brokerage firm Nirmal Bang Equities has an 'accumulate' call on V-Mart with a target price of ₹3,685 and said that the company is among the few pure play value apparel retailers that are catering to Tier2/Tier-3/Tier-4 cities of India.

"We see a huge runway for growth as it is currently concentrated only in the states of Uttar Pradesh and Bihar. There is potential to address 5,000 towns in India. It is present only in nearly 200-250 currently. V-Mart caters to the requirements of the ‘aspiring class’ and ‘middle class’ groups in the population with added focus on the demands of youth and young families who have the bulk of purchasing power in India," Nirmal Bang pointed out.

The brokerage firm added that the company has the optimum average selling price (ASP) for lower tier cities. It has been increasing ASP but is still keeping it 20-40 percent lower than national players.

While Covid-19 has affected the near term picture, V-Mart has not pulled back on its internal-accrual-funded 25 percent (CAGR) retail area expansion strategy despite some tepid consumer sentiments in recent times.

Nirmal Bang highlighted that the retailer is focused on gaining market share, especially as it sees regional peers facing financial pressure.

"It has launched an Omni channel initiative, which could be a big driver of growth going forward. The recent acquisition of ‘Unlimited’, the value fashion business of Arvind Fashions, with a decent sized footprint in South India, in our view, will hasten the process of making V-Mart a national player without making inordinately large investments," said Nirmal Bang.

However, there are concerns also. With major conglomerates penetrating into the organized retail territory, footfalls are expected to get impacted in the near term. However, as per Nirmal Bang, V-Mart indicated that in the long term, footfalls will depend on the customer retention power of the retail companies.

Disclaimer: The views and recommendations made above are those of the broking firms and not of MintGenie. &nbsp;

V-Mart Retail stock jumps more than 5%; brokerages remain positive after Q4 numbers

V-Mart reported total income of ₹461.57 crore during Q4FY22 as compared to ₹356.22 crore during the same quarter last year.

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