Motilal Oswal has maintained its ‘Buy’ rating on Vishal Mega Mart with a target price of ₹125. While the retailer’s second-quarter revenue grew 14% year-over-year, it slightly missed expectations due to a shift in festive season timing. Investors are now tracking whether the company’s operating leverage can improve margins in the second half of the year as demand remains steady.
Brokerage firm Motilal Oswal has maintained a 'Buy' rating on Vishal Mega Mart, setting a target price of ₹125 per share. The retailer’s performance in the second quarter of fiscal year 2027 was impacted by a shift in the festive calendar, which tempered overall revenue growth and put pressure on short-term profitability.
Q2 Performance and Margin Context
Vishal Mega Mart reported a revenue increase of approximately 14% year-over-year, missing the brokerage's estimate of 16%. A critical metric for retailers, same-store sales growth (SSSG)—which tracks sales at stores open for more than a year—came in at 5.4%. Management noted that the timing of the festive season caused a delay in consumer spending, impacting the quarter's numbers.
Operational costs also weighed on performance during the period. Pre-Ind AS EBITDA margins contracted by 90 basis points to 7.2%. Analysts linked this dip to lower gross margins resulting from the festive calendar shift, alongside elevated employee costs, including wage adjustments and expenses related to employee stock option plans (ESOPs). As a result, both pre-Ind AS EBITDA and profit after tax saw only marginal year-over-year growth, falling roughly 5% below brokerage projections.
Outlook on Margins and Demand
Looking toward the remainder of the fiscal year, management has kept its target of 10% SSSG for the full 2027 fiscal year. Early data from the third quarter points to robust festive demand, with no immediate signs of a slowdown. Analysts expect gross margins to stabilize in the second half of the year, as the company implements cost-saving measures aimed at neutralizing inflationary pressure on raw materials.
A significant part of the brokerage’s outlook relies on operating leverage—the concept where a company's fixed costs are spread over a larger revenue base, leading to higher profit margins as the business scales. Analysts expect this leverage to potentially facilitate a 30-basis-point annual EBITDA margin expansion over the medium term.
For investors, the key monitorable will be the sustainability of festive demand and whether the company can successfully manage its cost structure against rising wage bills. While the long-term outlook remains focused on store expansion and operational efficiency, the immediate focus will likely be on whether margins recover in the coming quarters as the festive season fully plays out.