This midcap stock is an Indian retail company that operates a hypermarket chain, offering a wide range of products including apparel, general merchandise, and fast-moving consumer goods (FMCG) across India. The stock is in focus after Morgan Stanley gave a target price of Rs. 161, which has an upside potential of 61.24 percent.
Stock Price Movement
In Monday’s trading session, Vishal Mega Mart Limited’s share plunged by 0.45 percent from the previous close of Rs. 99.85. The stock opened at Rs. 101.85 and is currently trading at Rs. 99.40, with a high of Rs. 102.80 and a low of Rs. 99.40. The market capitalization now stands at approximately Rs. 44,816.67 crore.
What is the news?
Morgan Stanley has given an “overweight” rating to Vishal Mega Mart Limited, with a target price of Rs 161. This target price reflects a 61.24 percent potential upside from the stock’s previous day close of Rs. 99.85.
Target Rational
Morgan Stanley has a positive outlook on Vishal Mega Mart’s growth strategy, noting it stands out compared to its competitors due to its scale, market reach, product offerings, and profitability. The brokerage expects the company to achieve a revenue compound annual growth rate (CAGR) of 20 percent and a profitability CAGR of 27 percent from FY 2024 to FY 2029.
Furthermore, Vishal Mega Mart Limited’s return on equity (RoE) and return on capital employed (RoCE) are projected to improve significantly, reaching 16 percent and 15 percent by FY 2029, up from 9 percent and 10 percent in FY 2024.
However, Morgan Stanley has highlighted potential risks, including the shift towards convenience in shopping, senior management changes, or even promoter exits, which could affect the company’s growth trajectory. Additionally, slower same-store sales growth or a lack of expansion could pose challenges to achieving these projections.
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Business operation
Vishal Mega Mart serves middle and lower-middle-income consumers through 645 stores, a mobile app, and a website, spanning 414 cities across 28 states. The company operates an asset-light model by leasing its distribution centers and stores while sourcing products from third-party vendors.
The company’s local delivery service has 6.77 million registered users, and with over 16,500 employees, Vishal Mega Mart strengthens its market presence.
Recent quarter results
Vishal Mega Mart Limited’s revenue has increased from Rs. 4,219 crore in H1 FY24 to Rs. 5,033 crore in H1 FY25, which has grown by 19.29 percent. The net profit has also grown by 30.26 percent, from Rs. 195 crore in H1 FY24 to Rs. 254 crore in H1 FY25.
Vishal Mega Mart Limited’s revenue and net profit have grown at a CAGR of 21.65 percent and 41.88 percent, respectively, over the last four years.
In terms of return ratios, the company’s ROCE and ROE should be 11.4 percent and 8.41 percent, respectively. The debt-to-equity ratio of the company is to be 0.24x, which shows the company is almost debt-free. Vishal Mega Mart Limited’s EPS is to be Rs. 1.02.
Written By – Nikhil Naik
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