Vishal Mega Mart gains share as private labels support tier-2/3 growth

Investment View and Valuation

ICICI Securities’ October 22, 2026 results update on Vishal Mega Mart maintains a BUY recommendation and a DCF-based target price of Rs 150.

The broker’s positive stance is founded on Vishal Mega Mart’s high private-label mix, which supports differentiation and pricing control, alongside tier-2 and tier-3 store expansion, internally funded growth, supply-chain investment and a large loyalty base. ICICI Securities also sees Belong & Co., the company’s pilot apparel format for young, urban and affluent consumers, as a potential incremental growth driver.

Q2FY27 Operating Performance

Vishal Mega Mart reported consolidated Q2FY27 revenue growth of 14 per cent year-on-year to Rs 33,985 million. Reported same-store-sales growth was 5.4 per cent, affected by a shift in the festive calendar that moved festive sales into Q3FY27. After adjusting for the calendar shift, ICICI Securities estimates same-store-sales growth at approximately 9 per cent, indicating continued underlying demand momentum.

The company added 25 net stores during Q2FY27, comprising 26 openings and one closure. This took its network to 844 stores in 582 cities and 14.1 million square feet of retail space. About 76 per cent of stores are in tier-2 and tier-3 cities and towns.

Southern India is an expanding focus area. Of the 49 stores added in H1FY27, 24 were located in the southern region, taking the regional store count to 237.

Profitability and Pricing Actions

Q2FY27 profitability was weaker than revenue growth due to operating deleverage, gross-margin pressure and increased employee expenses. Gross margin declined 33 basis points year-on-year to 28.0 per cent, primarily due to a lower apparel mix. Employee cost rose 26.6 per cent year-on-year, reflecting minimum-wage hikes and new-store additions.

Reported EBITDA increased 4.4 per cent year-on-year to Rs 4,120 million, while EBITDA margin contracted 111 basis points to 12.1 per cent. PAT increased 3.7 per cent year-on-year to Rs 1,579 million, with PAT margin declining by about 50 basis points to 5.1 per cent.

Management addressed cost inflation by raising prices mainly in higher-priced products, which account for around 25 per cent of sales. It retained opening price points, which account for around 20 per cent of sales, and made limited, calibrated changes to middle price points, which account for around 50 to 55 per cent of sales. ICICI Securities believes this affordability-led approach helped Vishal Mega Mart gain market share.

Business Mix, Loyalty and Digital Reach

Apparel contributed 40.5 per cent of Q2FY27 revenue, general merchandise contributed 29.6 per cent and FMCG contributed 29.7 per cent. Management attributed the lower apparel contribution to the festive-calendar shift and expects a recovery in Q3FY27.

Private labels accounted for 72.5 per cent of sales, while loyalty members generated around 95 per cent of gross revenue. Vishal Mega Mart’s quick-commerce platform reached 781 stores across 532 cities, while registered users increased 41 per cent year-on-year to around 15.2 million.

Earnings Estimates and Outlook

ICICI Securities marginally revised its FY27E and FY28E EPS estimates. Its revenue, EBITDA and PAT estimates imply FY26 to FY28E compound annual growth of 18 per cent, 19 per cent and 25 per cent, respectively.

Estimated EBITDA margin rises from 14.6 per cent in FY26A to 14.8 per cent in FY27E and 14.9 per cent in FY28E. The report retains the Rs 150 target price using a discounted cash flow methodology.

Key Pressure Points

• Festive-calendar disruption, which affected reported same-store-sales growth and apparel contribution in Q2FY27.
• Apparel-mix-related gross-margin pressure.
• Operating deleverage.
• Higher employee costs, including the impact of minimum-wage hikes and new-store additions.