Shares of V-Mart Retail gained more than 2% in morning trade on Thursday after domestic brokerage Motilal Oswal initiated a ‘Neutral’ call on the stock.
The brokerage firm has set a target price of ₹1,800 per equity share on V-Mart Retail, which indicates an upside of a marginal 2.4% from the stock’s previous closing price of ₹1,757.65 per piece.
Motilal Oswal has stated that V-Mart Retail’s core business is expected to improve from the third quarter (current quarter) of the ongoing financial year 2023-24 (FY24). The company has reported a weak trajectory of earnings over the past couple of years, majorly due to underlying weakness in its core business, along with suboptimal profitability.
This suboptimal profitability has been caused by V-Mart Retail’s weak revenue productivity and sluggish performance.
However, Motilal Oswal is of the view that the retail company is likely to shut down more than 15 of its stores in the last quarter (Q4) of FY24, which is expected to help the company recover its margins and reach levels of 6-7% as the new financial year 2024-25 (FY25) begins.
The Gurugram-based company’s management is now also looking at reducing its investments in Limeroad, while also considering revisiting the previous strategy of higher spending which would lead to expansion of its business and achieve operating leverage.
By achieving operating leverage, V-Mart Retail should be able to curb losses from ₹60 crore and achieve break-even in the upcoming financial year 2025, the brokerage observed.
V-Mart Retail shares traded 2.21% higher at ₹1,796.55 per piece on BSE at 11:39AM.
(Edited by : C H Unnikrishnan)
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