Morgan Stanley has initiated coverage on Vishal Mega Mart with an overweight rating and a target price of Rs 161, citing the company’s strong growth strategy. The brokerage highlighted Vishal’s competitive advantages, including its scale, market tiering, product offering, consumer loyalty, and profitable business model, which position it better than peers in the retail segment.
Vishal Mega Mart is one of India’s largest value retail chains, catering primarily to consumers in tier 2 and tier 3 cities with an extensive network of stores offering a mix of affordable fashion, household goods, and groceries. Its focus on cost-efficiency and deep consumer understanding has enabled it to establish a strong foothold in underserved markets, making it a preferred shopping destination for price-conscious buyers.
Morgan Stanley expects Vishal to deliver a 20% revenue CAGR and a 27% PAT CAGR over FY24-29, driven by its expansion strategy and increasing consumer penetration in tier 2 and tier 3 cities. The brokerage also projects an improvement in return metrics, with ROE and ROCE forecasted to rise from 9% and 10% in FY24 to 16% and 15%, respectively, by FY29.
However, Morgan Stanley flagged downside risks, including a shift in consumer preference toward convenience shopping, changes in senior management, promoter exit risks, and slower same-store sales growth (SSSG) or store expansion. Despite these risks, the brokerage believes Vishal’s defendable strategy and market positioning will support long-term growth.
