New Delhi, India — Vishal Mega Mart (VMM) reported its second-quarter net profit missed analyst estimates by 14%, primarily attributed to a shift in festive sales, minimum-wage increases, and higher employee stock ownership plan (ESOP) expenses.
Despite the Q2 disappointment, the consensus 'Buy' rating for Vishal Mega Mart Ltd. shares remains intact among brokerages. However, several firms have revised their target prices downwards. JPMorgan reduced its target to Rs 120 from Rs 145, Axis Capital to Rs 135 from Rs 150, Investec to Rs 135 from Rs 147, and Jefferies to Rs 130 from Rs 160.
Brokerage Insights and Future Outlook
Emkay Global highlighted that while Q2 performance was weak, management commentary indicated a strong start to the festive season, which is expected to help recover much of the previous quarter's shortfall. The firm noted that VMM's strategy of preserving entry-level price points and offering significant discounts against branded competitors is driving market-share gains, even amid inflationary trends.
Emkay Global also pointed out that while reported same-store sales growth (SSSG) was 5%, the adjusted SSSG stood strong at 9%. VMM has maintained its double-digit SSSG outlook for FY27. Initial progress in under-penetrated South and West India markets, along with a small-format store pilot for lower-tier cities, is proceeding as expected.
HDFC Institutional Equities toned down its FY27 and FY28 earnings estimates by 3-4% but maintained a 'Buy' rating with a target of Rs 135. The firm observed a 32 basis point year-over-year contraction in gross margin to 28% for the quarter, with 20 basis points attributed to the shift of higher-margin apparel sales to Q3.
MOFSL also cut its FY27-29 EBITDA and PAT estimates by 2-4% due to increased employee expenses and a slight moderation in SSSG projections, revising its target to Rs 170. MOFSL reiterated that Vishal Mega Mart remains one of the most consistent retailers under its coverage, citing its diversified category mix, ownership of opening-price-point products, significant contribution from its own brands, and lean cost structure as strong competitive advantages against both offline and online value retailers.
Overhangs and Investor Concerns
Despite positive operational comments, MOFSL noted that concerns regarding potential promoter stake sales and long-term promoter ownership, particularly after the private equity's exit, continue to be key overhangs for the stock.