This Multibagger Retail Stock is Locked in a 5 Per Cent Upper Circuit After Stellar Q3 Earnings – Is There More Upside Room?

The company's stock is locked in a 5 per cent upper circuit at Rs 1,840, reflecting strong market confidence in its growth trajectory. Over the past year, V2 Retail shares have rallied an astonishing 467.35 per cent, taking its market capitalization to Rs 6,364 crore

V2 Retail Limited, one of India’s fastest-growing value retail companies, has witnessed a surge in investor interest after reporting outstanding financial results for Q3 FY25. The company's stock is locked in a 5 per cent upper circuit at Rs 1,840, highlighting strong market confidence in its growth prospects. Over the past year, V2 Retail shares have rallied an astonishing 467.35 per cent, pushing its market capitalization to Rs 6,364 crore.

Q3 FY25 Performance Highlights

V2 Retail reported robust financial performance for Q3 FY25, with revenue from operations increasing by 58 per cent year-on-year (YoY) to Rs 590.9 crore. The gross margin improved slightly to 32.1 per cent from 31.4 per cent in the same quarter last year. The company’s EBITDA grew by an impressive 83 per cent YoY to Rs 111.5 crore, while the EBITDA margin rose to 18.9 per cent from 16.3 per cent in Q3 FY24. Profit after tax (PAT) for the quarter nearly doubled, reaching Rs 51.2 crore, a remarkable 117 per cent YoY growth compared to Rs 23.6 crore in Q3 FY24.

Operational and Strategic Highlights

The company delivered exceptional operational performance, achieving a Same Store Sales Growth (SSG) of 25 per cent in Q3 FY25 and 31 per cent in 9M FY25. Volume growth stood at 34 per cent for the quarter and 43 per cent for the nine months. Additionally, the average selling price rose to Rs 343 in Q3 FY25 from Rs 291 in Q3 FY24, while the average bill value increased to Rs 924 from Rs 855. Sales per square foot also improved significantly, demonstrating enhanced efficiency.

As of December 31, 2024, V2 Retail operated 160 stores with a retail area of approximately 17.22 lakh square feet. During 9M FY25, the company opened 45 new stores and closed 2, focusing on penetrating underserved rural markets while maintaining a strong presence in Tier I and Tier II cities.

Chairman and Managing Director Ram Chandra Agarwal credited the company’s stellar performance to innovative product offerings, improved store experiences, and a customer-centric approach. V2 Retail’s strategic focus on expanding into Tier II and Tier III cities and catering to the neo-middle-class population has bolstered its market position.

Is There More Upside Room?

While V2 Retail’s financial performance has been stellar, its current valuation raises concerns about further upside potential. The company’s earnings have grown significantly, with sales compounding at 58 per cent CAGR and profits at 349 per cent CAGR on a trailing twelve months (TTM) basis. This phenomenal growth has led to a 4x surge in its stock price over the past year.

However, the stock’s PE ratio of 93.4x is slightly above the industry average of 89.1x. On a forward P/E basis, the stock trades at 69x, assuming an implied growth rate of 35 per cent. The PEG ratio of 2.67x suggests that valuations may be stretched relative to the company’s growth rates.

Another challenge is the company’s high debt-to-equity ratio of 2.19x, which could constrain its ability to pursue aggressive expansion plans. While urbanization and the growing demand for organized retail spaces have fueled V2 Retail’s growth, its financial leverage might pose challenges in sustaining the current momentum.

Despite valuation concerns, V2 Retail remains a prominent player in India’s value retail segment. The company’s commitment to providing "Value and Variety" to customers, coupled with its strong presence in Northern and Eastern India, gives it a competitive advantage. By addressing the needs of the neo-middle-class population in Tier II and Tier III cities, V2 Retail has positioned itself as a trusted destination for affordable, high-quality fashion.

Future stock performance will depend on the company’s ability to maintain its growth momentum, reduce financial leverage, and improve operational efficiency. With a robust pipeline of new stores and a focus on customer satisfaction, V2 Retail is well-placed to set new benchmarks in India’s retail industry.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice.