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."

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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.

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