ICICI Securities has maintained a 'Buy' rating on Vishal Mega Mart with a target price of Rs 150. While the company faces margin pressures from rising costs, analysts point to its strong private label focus and expansion plans as key drivers for future growth.
ICICI Securities has released its latest assessment of Vishal Mega Mart, maintaining a 'Buy' rating and setting a target price of Rs 150. This outlook follows the company's performance in the second quarter of the 2027 fiscal year, where it recorded a 14% year-over-year rise in revenue.
During the quarter, the retailer’s same-store sales grew by 5.4%. However, the company faced challenges regarding its profit margins. Higher staff costs and a shift in the festive season calendar impacted overall profitability. These factors created a competitive environment where maintaining margins became difficult for retailers across the segment.
To manage these pressures, the management has been using a tiered pricing strategy. The company has kept prices steady on its entry-level products, which account for about 20% of its total sales, to protect its reputation for affordability. Meanwhile, it implemented price increases on its premium products, which make up roughly 25% of its sales. This balanced approach helps the company reach cost-conscious consumers while maintaining better profitability in higher-value categories.
A significant factor supporting the company’s operations is its heavy reliance on private labels, which currently contribute about 73% of total sales. By selling its own branded products, the company keeps better control over both pricing and product quality. Additionally, the retailer continues to leverage its massive loyalty program, which includes 181 million members and accounts for nearly 95% of its total revenue, ensuring a steady customer base for its stores.
Looking toward the future, the brokerage anticipates consistent performance. Analysts at ICICI Securities have modeled a compound annual growth rate of 18% for revenue and 25% for earnings between the 2026 and 2028 fiscal years. This growth is expected to be supported by an ambitious plan to expand its network into more tier-2 and tier-3 urban centers. The company is also introducing new brands, such as 'Belong & Co.', to attract a broader range of shoppers.
For investors, the primary monitorables will be how the company balances its aggressive physical store expansion with its need to control operating costs. With the expansion being funded by the company's own internal cash, tracking the impact of these spending plans on future margins will be important. Investors may also watch how successfully the company manages its supply chain and logistics as it increases its store count across different regions.