Outstanding numbers from V-Mart in Q2 -http://www.bseindia.com/corporates/anndet_new.aspx?newsid=fe0e3651-fb8a-4a57-b262-89d7facf4f70
Few more details which were not covered earlier:
a) Number of stores in FY13 was 69. By end of FY14, mgmt has indicated they would take it to 94. And by end of FY15 to 120. This expansion would be done with no debt and no dilution of equity. (They are following it so far and still have 44 cr left from IPO funds for store expansion)
b) Key monitorables remain: Gross margins (currently around 30-32%, will help us check on massive discounts), Same store sales growth (has been around 10%, and going forward, mgmt has guided for around 10-15%), Sales per sq. ft (Rs.735 now), Working capital/Sales (currently at 82 days), average billing rate (currently Rs.400-Rs.500), shrinkage ratio (around 1%) and debt (long term+short term - there will be seasonality in short term debt due to nature of the business though)
c)Have 2000 suppliers, and each supplier not exceeding 1% of sales. No plans to get into manufacturing (backward integration as Vishal Retail called it, before that bombed).
d)Requires about Rs.2500-2600 per sq. ft capex to set up a store for the first time (Rs.1300 for the store, and Rs.1300 for inventory). So, 50 new stores for the next 2 years, on average of 8000 sq ft should come to Rs.100 cr (similar to what they have raised in IPO). Mgmt has guided that all further growth in stores will come from internal accruals only.
e)It secures long term leases (9-10 yrs) with all the rental locations, and the termination would be at the discretion of V-mart. Biggest surprise is the rent per sq. ft over the past 5 years has hovered around Rs.28/-. That is, almost no inflation for 5 years in rent. This is combination of aggressively moving into tier 3 cities + mgmt's negotiations
f) From concall Q3 FY13 - "On same store sales growth - If you look at it for the age of 1-3 years, the Y-to-D same store sales growth is 19%; for the 3-5 years category it is 15% and > 5 years it is 8%. And this gives an overall aggregate of about 14%"
Since most of the stores right now are in the 1-3 year category, we can expect good same store sales growth for the next 2-3 years.
g) Current business mix -86% from fashion (apparel 75%, non-apparel 11%) and 14% from Kirana. No more kirana store addition. By logic, the % of kirana business should go down since more number of new fashion stores will be added (which should improve net margins)
h) On average, they employ about 33 people per store
i) From the AR (which is one of the best ARs I have ever read) -"At V-Mart, we expect that our business model will generate a 35-40% revenue growth and project to add about 25 stores in 2013-14, with a higher percentage growth in our post-tax bottomline, enhancing value in the hands of the shareholders"
j) From the AR again (and similar sentences repeated in concalls) - "At V-Mart, we would rather grow 30% compounded across ten years supported by revenue growth in every single year as opposed to 50% compounded with three down years in ten."
k) Q4 FY13 concall, CFO - "On an average actually just to give you the seasonality in terms of numbersaI am talking basically about the bottom line. The bottom line in the first quarter is about 25%; in the fourth quarter at about 17% and the balance is accommodated between the second quarter and third quarter; the third quarter taking about 45% to 60% anywhere between that depending upon how the second quarter goes."
Based on my study and the direction given by the management (along with the stellar Q2 results), I am conservatively expecting an EPS of Rs.14-Rs.16 in FY14, if not more. Let's see how it goes.