Vishal Mega Mart's highest share price target implies 17% upside on growth potential

Brokerage firm Jefferies has maintained its 'Buy' recommendation on hypermarket chain Vishal Mega Mart Ltd., with a price target of ₹175 per share. This target implies a potential upside of 17% from Monday's closing levels.

Despite a soft industry demand environment, Vishal Mega Mart has been able to drive same-store sales growth on a daily basis, the brokerage said.

According to Jefferies, visibility remains high with plans to add more than 80 stores per year, and a pilot program is underway for smaller store formats in towns with populations of fewer than 50,000.

Vishal Mega Mart continues to maintain leadership in entry-level price points and offers a high-quality private-label portfolio, the brokerage added.

For the June quarter, Vishal Mega Mart reported results that were higher on a year-on-year basis.

Revenue for the quarter increased by 21% from last year to ₹3,140 crore, while its Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) rose by 25.6% year-on-year to ₹459 crore.

EBITDA margin for the quarter rose by 60 basis points from last year to 14.6%. Margins for the quarter expanded despite higher other expenses, employee benefit expenses and finance costs. Gross profit margin for the quarter expanded by 20 basis points to 28.4% from 28.2% last year.

Net profit for the period surged by 37.3% from last year to ₹206 crore. Profit for the period was aided by a higher other income, which grew to ₹17 crore from ₹7.7 crore last year.

Same store sales growth stood at 10.5% year-on-year, while on an adjusted basis, that figure stood at 11.4%.

At the current market level, the stock is nearly double of its IPO price at ₹78 per share. The stock listed in December last year.

12 analysts have coverage on Vishal Mega Mart, of which eight of them have a 'Buy' rating, three say 'Hold' and one has a 'Sell' recommendation.

Shares of Vishal Mega Mart are currently trading 0.20% higher, having cooled off from opening highs at ₹149.32.