Motilal Oswal Boosts Lenskart Target Amid Growth Prospects

The brokerage firm Motilal Oswal has raised its price target for Lenskart Ltd. to Rs 650, while reiterating a 'Buy' rating. This move reflects the company's solid fourth-quarter performance and its strong potential for future growth.

Omnichannel Strengths Drive Success

Lenskart's success is largely attributed to its integrated business model and expanding international reach. The company has built significant competitive advantages by centralizing manufacturing and logistics, achieving cost efficiencies through backward integration, and developing an extensive omnichannel network. Its "house-of-brands" strategy caters to various market segments, making quality eyewear accessible.

Financial Forecasts Show Strong Growth

Motilal Oswal has revised its financial projections upward for Lenskart. Revenue estimates for FY27E and FY28E have increased, as have projections for Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and Profit After Tax (PAT). The brokerage forecasts a compound annual growth rate (CAGR) of 25% for revenue, 42% for EBITDA, and 44% for PAT between FY26E and FY28E. This growth is expected to be supported by domestic revenue expansion of approximately 26% and international growth of 23%. The firm's target price is based on an unchanged valuation multiple of 55 times FY28E pre-IND AS EBITDA.

Valuation Metrics Raise Questions

Despite the positive outlook, Lenskart's valuation is notably higher than its industry peers. Its Price-to-Earnings (P/E) ratio significantly exceeds the peer median. This premium valuation comes with a relatively low Return on Equity (ROE) over the past three fiscal years. Although Lenskart holds a substantial market share in India's organized eyewear sector, its high valuation could present a risk if growth targets are not consistently met. Concerns also exist regarding the sustainability of profit growth matching net sales and operating profit growth, with some analyses indicating flat annual growth in these areas. Lenskart's Return on Capital Employed (ROCE) is reported at around 2.3%.

Analyst Views Remain Positive

The majority of analysts maintain a "Buy" rating on Lenskart Solutions, with most recommending a purchase. The average 12-month price target is around ₹551.00. Key drivers for future growth are expected to be the expansion of its store network and continued focus on technology and automation. Analysts anticipate ongoing growth fueled by premiumization strategies and further omnichannel expansion.