V-Mart Retail Ltd - Incredible Growth

Unprofitable growth.

Company Overview

V-Mart is a complete family fashion store that provides its customers true value for their money. It has 400+ stores in 270+ cities covering 27 states. It primarily operates in Tier-II and Tier-III cities.

Share Details

• NSE:VMART

• Closing Price = 2034.85 (7-Jun-23)

• 52 Week High = 3174.9 (56% above closing price)

• 52 Week Low = 1995 (2% below closing price)

• P/E = Not applicable

• Market Cap = 4,023 cr ( ~$ 490 million)

Quality: Returns on capital employed in cash

VMART had a history of good financial results but from FY20 on wards the quality of results have deteriorated. The last three financial years do not inspire great confidence in the company.

Growth

Average top line growth of 22% for the last 12 financial years is nothing but spectacular. This is what one expects from small cap in the hope of it growing into a large cap one day. But, the profitability this growth has delivered is terrifying.

In FY22-23, the company has doubled its revenue when compared to its revenue in FY17-18. But FY17-18 delivered its biggest profit at 78 crores and the company while doubling in size has never come even close to the profit of 78 crores.

So What????

If I own the stock, I as an average retail investor would like to see opportunities for exiting it.

If I don’t own the stock, I would not like to buy it any time soon.

Disclaimer

• It is an analysis of the company data and not a stock recommendation

• My analysis can be completely wrong and can change the next minute based on changes in my understanding of the company

• I look to own good companies at prices where there is a path to market beating returns over decades