Analysts at HDFC Securities and Axis Securities noted that V-Mart missed their revenue, profit, and EBITDA estimates as a result of manpower spending increase and integration cost of Limeroad.
The V-Mart Analysts: Jay Gandhi for HDFC Securities maintained the ‘buy' rating for the stock but downgraded the price target to ₹2,900 from ₹3,150.
Axis Securities' PreeyamTolia also maintained the ‘buy' rating with a target price of ₹3,300, a potential 30% upside from the current market price of around ₹2,550.
The V-Mart Thesis: HDFC Securities noted that the company’s 12% year-over-year rise in revenue to ₹777.6 crore was 2% lower than its estimates. The brokerage said that profitability miss was starker as the company reported a 13.3% YoY rise in profits much lower than the expected 18%.
Axis Securities highlighted that the company’s result was a miss on all fronts "as demand in Tier 2/3/4 cities remained impacted owing to inflationary pressure."
Get all the latest Share Market trends and news to set you up for the week ahead.
Both analysts also pointed out that the below-expectation numbers were in part a result of the company's integration-related expenses of Limeroad – a Gurugram-based e-fashion retailer. V-Mart acquired Limeroad in November 2022, the company had then said that it planned to invest ₹150 crore in the online retailer.
Taking this expense into account HDFC Securities cut the company's FY24/25 EBITDA estimates by 13% and 7%. The brokerage further added that "while V-MART remains among the stronger value fashion retailers, its profitability is likely to remain under pressure in the near to medium term."
Axis Securities also sees near-term challenges ahead for the company as it expects demand to take more than 3-4 months to fully recover as per estimates. It added that the recent correction in stock provided a margin of safety for the investors.
Price Action: Shares of V-Mart closed 0.29% higher at ₹2,547.15 on Friday to break the 4-session losing streak that started after it released its Q3 report on Monday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.