Vishal Mega Mart Ltd. shares gained 2% in Thursday's trading session following optimistic reports from foreign brokerages Jefferies and Morgan Stanley. Both firms shared positive takeaways from the company's recent analyst meet, underscoring Vishal Mega Mart's robust store expansion initiatives, double-digit same-store sales growth (SSSG), new retail formats, strong private label performance, and growing quick commerce operations.
Brokerage firm Jefferies reaffirmed its 'Buy' rating on the stock, setting a price target of Rs 160. Concurrently, Morgan Stanley maintained its 'Overweight' rating with a price target of Rs 146. Based on the prevailing share price of approximately Rs 106, these targets suggest potential upsides of around 51% and 38% respectively for investors.
Aggressive Store Expansion Fuels Growth Outlook
Store expansion remains a pivotal growth driver for Vishal Mega Mart. Jefferies noted the company's clear strategy to grow from its current 833 stores to 2,000 over time, with the existing format capable of supporting over 100 new store additions annually. The brokerage also highlighted pilot programs for smaller-format stores currently underway in Uttar Pradesh and Haryana, a concept that could eventually expand to as many as 4,000 locations.
Morgan Stanley similarly reported management's guidance of more than 100 store openings annually for the current format, alongside four to five openings per quarter for the smaller-format stores. The company continues to target double-digit SSSG for the fiscal year 2027, despite a delayed festive season shifting from the second to the third quarter this year.
Quick Commerce Reaches Cash Break-Even
Another significant point from the analyst meet was the notable progress in Vishal Mega Mart's quick commerce division. Jefferies indicated that quick commerce currently accounts for 2-10% of individual store revenues, though its overall contribution to total sales remains under 4%. Importantly, the quick commerce segment has already achieved cash break-even, with its younger, affluent customer base largely considered incremental to the existing clientele.
Morgan Stanley corroborated these findings, noting that Vishal Mega Mart's online channel is at cash break-even, with Fast-Moving Consumer Goods (FMCG) products comprising a larger share of digital sales compared to apparel.
Private Labels: A Key Differentiator and Margin Driver
Private labels continue to be an integral and differentiating component of Vishal Mega Mart's business model. Jefferies reported that private labels represent over 60% of FMCG volumes and 74% of general merchandise sales. This penetration exceeds 90% in specific categories such as cookware, furnishings, and select household products.
These private-label products offer substantial margin advantages, with FMCG private-label margins roughly double those of national brands, and general merchandise margins 3-3.5 percentage points higher than branded alternatives, according to Jefferies.