V-Mart reports mixed operational performanceVMART - 1772 Change: -19.25 (-1.07 %)
News: V-Mart reported mixed operational performance, with sales coming in below our estimates, while healthy gross margins led to beat on the profitability front. On a favourable base, revenue for the quarter grew by 231% YoY to Rs 587.8 crore (I-direct estimate: Rs 622.4 crore). Revenues also includes contribution from Unlimited format (~20% of sales) which was integrated in Q3FY22. Higher revenue contribution of Unlimited format (which yields better gross margins), lower discounting and fresher inventory resulted in company recording its highest ever gross margins (up 630 bps YoY, 240 bps QoQ to 37.3%). on account of positive operating leverage, company reported EBITDA margin of 15.1% (up 410 bps QoQ, Q1FY20: 13%). On a three year CAGR basis, absolute EBITDA grew by 15% to Rs 88.7 crore (I-direct estimate: Rs 64.7 crore).
View: Excluding the Unlimited format, revenue recovery for V-Mart stood at ~104% of pre-Covid levels. ASP’s for apparel grew by 25% YoY to Rs 370, whereas on the company level it increased by 20% to Rs 233. Volumes are expected to have de-grown by double digit as compared to pre-Covid levels. As anticipated, revenue recovery for V-Mart is sluggish compared to other apparel players as higher RM costs and subsequent price hikes (17-20%) have materially impacted demand since the target audience is price sensitive (apparel ASP: < Rs 400). Also inflationary demand scenario has had a higher impact in Tier II-IV cites (V-MART has ~60% stores in Tier III-IV regions) as compared to urban region.