Motilal Oswal Financial Services has initiated coverage on V2 Retail with a ‘Buy’ rating and a target price of Rs 275, indicating an upside of around 27% from the brokerage’s reference price of Rs 217.
The brokerage believes V2 Retail’s focus on value-conscious consumers in tier-II and tier-III markets, along with its strong store economics and disciplined inventory management, provides a long runway for growth.
V2 Retail shares rose 3.21% to Rs 223.44 on the NSE at around 9:30 am on Monday, compared with their previous close of Rs 216.50. Despite Monday’s gains, V2 Retail shares have declined 1.02% over the past week, marginally outperforming the benchmark’s 1.19% fall.
Why is Motilal Oswal bullish?
V2 Retail operates around 400 stores across more than 300 cities, primarily catering to aspirational but price-sensitive households. Private labels account for nearly 90% of its sales, while products designed in-house contribute around 35-40%.
The company also recorded sales of approximately Rs 923 per square foot per month in FY26, which Motilal Oswal said was the highest among value-fashion retailers. Its aged inventory has declined to less than 5%, while more than 90% of merchandise is sold at full price.
The brokerage expects V2 Retail to expand its network to around 770 stores by FY29, supported by approximately 450 store additions over FY26-FY29. It estimates that nearly 460 cities still offer expansion opportunities for the retailer.
Strong store economics
According to Motilal Oswal, a typical 10,000-square-foot V2 Retail store requires an investment of around Rs 2.2-2.5 crore and generates a pre-Ind AS EBITDA margin of approximately 13% at the store level.
New stores become EBITDA-positive from their first month of operations, while the estimated capital payback period is about 13 months. The brokerage said these economics have remained healthy even as the company expanded its store network nearly fourfold over the past three years.
Growth estimates
Motilal Oswal expects V2 Retail’s revenue and pre-Ind AS EBITDA to grow at compound annual rates of around 40% and 38%, respectively, between FY26 and FY29.
Revenue is projected to increase from Rs 3,060 crore in FY26 to Rs 8,351 crore in FY29. Pre-Ind AS EBITDA is estimated to rise from Rs 288 crore to Rs 752 crore, while adjusted profit is expected to grow from around Rs 150 crore to Rs 370 crore during the period.
The expansion is expected to be driven by approximately 150 store additions annually, mid-single-digit same-store sales growth and better absorption of fixed costs as the network scales.
Valuation and target price
Motilal Oswal’s Rs 275 target is based on a discounted cash-flow valuation that implies approximately 15 times V2 Retail’s estimated September 2028 pre-Ind AS EBITDA and around 25 times its estimated pre-Ind AS earnings.
The brokerage expects the company to generate cumulative operating cash flow of around Rs 780 crore over FY26-FY29. However, free cash flow is likely to remain modest because the planned expansion expenditure of approximately Rs 770 crore could exceed internal accruals during the accelerated store rollout.
What are the key risks?
Motilal Oswal identified rapid expansion and store-site selection as key risks. A failed store could result in an unrecoverable cost of around Rs 300 per square foot, while a rise in store closures beyond the projected 3-4% could affect returns.
Other risks include V2 Retail’s high exposure to northern and eastern India, growing competition from retailers such as Zudio, Reliance Trends and Max, and the possibility of inventory or fashion-assortment errors as the share of in-house designs increases.
This article has been written by Somanjali Das, who is not a SEBI-registered Research Analyst or an investment advisor. Somanjali Das does not hold any financial interest in V2 Retail as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of the EconomicTimes Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.
