Vishal Mega Mart delivered impressive double-digit same-store sales growth (SSSG) of 10% in the June quarter, significantly outperforming peer value retailers who posted 7% growth. According to Business Standard, about 7% of the gains came from new customers, while the rest came from higher purchases by existing customers. The retailer successfully supported customers amid high inflation through lower promotional intensity and stable pricing in opening and mid-price products. The company's hyperlocal quick commerce delivery also scaled well, with registered users up 44% year-on-year to 14.1 million. While there could be volatility on a quarterly basis due to the festive period or seasonal shifts, the company is aiming for sustained double-digit SSSG for the full year.
Multiple brokerages have issued 'Buy' ratings on Vishal Mega Mart with varying target prices, reflecting confidence in the retailer's growth trajectory. Emkay Global Financial maintains their 'Buy' rating with a target price of ₹170, implying significant potential upside from current levels. Jefferies retains their 'Buy' rating with a target price of ₹160, suggesting an upside of approximately 54% based on current market price of around ₹104. The brokerages' valuations are premised on ~27 times DCF implied Sep'28E pre-INDAS 116 EV/EBITDA, which implies ~42x Sep'28 EPS for Motilal Oswal, while Emkay Global Financial expects the company to deliver ~18%/27% revenue/PAT CAGR over FY26-29E. The stock is currently trading at an attractive valuation of ~47x/36x FY27/28E EPS according to Emkay Global Financial.
Vishal Mega Mart currently operates 833 stores and sees a clear path towards around 2,000 stores over time, with its existing format capable of supporting more than 100 store additions annually. Management has reiterated its aspiration of delivering double-digit same-store sales growth for FY27, though on a quarterly basis, there could be deviations due to the change in the festive calendar. The longer-term opportunity could be even larger, with smaller formats aimed at towns with populations of 40,000-50,000 being piloted in Uttar Pradesh and Haryana, potentially expanding the addressable store opportunity to around 4,000. The company has added three small-format stores in Q1, taking the total count to 16 stores. While small-format stores are about half the size of regular stores, they deliver comparable revenue per square foot and return on capital employed ratios. Given that sales were at ₹10,000 per square foot for FY26, there is headroom for further growth.
The recent extension of the long-term CEO's tenure for another five years, alongside redesignation as Founder, provides significant comfort on the continuity of the business strategy. Motilal Oswal notes that this leadership stability is crucial for sustaining the company's growth trajectory and maintaining its competitive positioning. The brokerage believes the company's management remains confident of sustaining double-digit same-store sales growth on an annual basis, with management believing there is potential to add 1,200 stores in the large format (~17k sqft) in the next 10-12 years. However, concerns about potential promoter stake sales and long-term ownership still remain key overhangs for the stock's performance. The company showcased its mid-level management alongside its CEO for the first time during the recent investor day, demonstrating strong succession planning and institutional depth. The retailer is expected to reinvest the savings on gross margin from scale benefits to improve the product quality and price proposition.
During the recent investor day, Vishal Mega Mart unveiled a new apparel format called Beyond & Co with an average selling price of around ₹900. According to HSBC, the company's apparel segment remains a fast fashion focused collection, with the new format differentiating itself through superior process, execution and inventory selection. In the general merchandise segment, private label share varies across sub-segments with highest penetration at around 35% in home furnishings, and the company intends to expand the range in toys. For the FMCG segment, private label penetration is more or less covered in most categories across HPC and foods, with gross margins for private labels around two times of third-party brands. The company has also launched Belong & Co, an urban youth-focused apparel-only format in Delhi, positioned at a relatively premium level and expected to carry better margins. The company's value-for-money playbook is evolving with rising aspirations, with management seeing a long growth runway via store expansion, refurbishments, private labels and quick commerce.
Quick commerce remains a relatively small part of Vishal Mega Mart's business, contributing less than 4% overall, although it accounts for 2-10% of revenues at individual stores. Management now believes the earlier 5% contribution aspiration will need to be revised upwards as investments in the business increase. Importantly, the quick-commerce operation is already cash breakeven and is attracting younger and more affluent consumers who are largely incremental to the existing customer base. Online sales have a much higher FMCG mix at around 72%, compared with around 27% in stores, resulting in lower gross margins. However, inventory remains fully fungible across channels. The company is investing heavily across quick commerce, RFID, AI, warehouse automation, digital capabilities and new formats, yet management remains comfortable with its margin trajectory as volume growth of around 17-18% is generating operating leverage. Despite heavy investments in tech, supply chain and automation, the company's strong volumes and sourcing advantages underpin confidence in sustaining margins.
Vishal Mega Mart's share price rose nearly 2% before closing 1.13% lower at ₹105.20 on Thursday, reflecting volatile trading patterns following recent analyst interactions. The stock remains in focus after brokerages highlighted the retailer's growth prospects in store expansion, private-label strategy, quick-commerce opportunity and margin improvement potential. A total of 21 analysts have coverage on the Vishal Mega Mart stock, with 20 having 'buy' recommendations and one having a 'sell' rating. While the second quarter of this fiscal could see some moderation in performance due to the festive shift, HSBC expects Vishal Mega Mart's full-year performance to be unchanged. The company's strong volumes and sourcing advantages, combined with its evolving value-for-money proposition and expanding addressable market through new formats, continue to underpin analyst confidence in the retailer's long-term growth trajectory. Motilal Oswal Research has reiterated its buy rating with a revised target price of ₹135, while HSBC maintains a buy rating with a target price of ₹153.
