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Sunday, March 30, 2014

V-mart Retail ltd:-The best bet in the retail sector with multibagger potential

 Very recently recommended to the paid members at 250 odd bucks.Hardly has moved 20rs from the suggested level.Its more of a Gift to my loyal readers to make some cool bucks now.

Stock tip:-

Scripscan:V-mart Retail ltd
Traded in:Nse-Bse
Buy range:250
Target:325
Duration:4-7 months
Return percentage:30%
Long term target:Should continue to provide 30% CAGR for coming 5 years.

Business:V-Mart is a complete family fashion store that provides its customers true value for their money.V-Mart offers fashion garments at down-to-earth prices and over a period of time has emerged as the destination of choice for bargain hunters and the fashionable alike.It primarily operate in tier II & tier III cities with the chain of “Value Retail” departmental stores.The stores cater to the needs of the entire family altogether by offering apparels, general merchandise and kirana goods.“Price Less Fashion” is the Main Motto through which the company believes in providing the latest trends to the upwardly mobile Indians at the best possible price.

Stores:V-mart operates 88 stores across 76 cities in 12 states and union territories(with a total area of 7.1 lakhs sq ft,so round about 8000 sqft per store).The stores are located in prime cities such as Bihar, Chandigarh, Gujarat, Haryana, Jammu and Kashmir, Madhya Pradesh, New Delhi, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh.New stores are set to be opened in smaller towns and cities in regions such as West Bengal, Assam and Uttarakhand etc.The company is among the pioneers in setting up modern ambiance stores or large retail malls across various small towns and cities like including Sultanpur, Ujjain, Motihari and more.

Why I am bullish:-

1)The average sales per sq ft has increased from Rs.507 in 2011 to around 710rs now.The management is confident of increasing the same to even higher rates(ideal sales rate just over 800 bucks according to the management) by meeting the aspirations of people by proving quality fashion at affordable prices.The inventory days has improved from 104 in FY12 to 92 in FY13.Present breakup of product mix is 86:14 in apparel:kirana stores. The company plans to take it to 90:10 in about 2 years which will provide higher margins.

3)What is like the most about the company is its concentration towards the Tier-3 cities,huge growth potential with not much competition(Likes of Trent,Shoppers stops or even Big bazaar would probably never come there in the next 5 years).The store guidance given by them stands at 94 by march 2014.The company plans to add up atleast 25 stores for the coming few years.Its a simple calculation.So 50 stores would come up in next 2 years.It takes about 2500 bucks to set up per sq ft(1300rs store and 1200 bucks inventory).So on a capex of 100crs(again no debt or equity dilution but to be funded by Ipo money and from internal accruals),calculate the sales folks.

4)The company has been an amazing performer over the last several years.Both sales and profits have grown at over 35% CAGR respectively for the last 5 years.The company ended fy12-13 with revenues of 383crs accompanied by a PAT of 18crs.In the 9 months of the present fiscal,it has already done revenues of 395crs and a PAT of 24crs.The company is expected to end the fiscal with revenues of 500 crs and a profit of 29crs(last quarter isnt the strongest quarter and contributes around 17% on an overall basis).Further for fy15,the company is expected to grow by 40%(700crs of revenues and  around 42crs of PAT).

4)A lot of retail companies like Vishal killed themselves by opting for massive debts.Retail as a sector always remained an area of interest but due to high leveraging and exorbitant valuations,(industry PE at around 40 as per estimates of Moneycontrol)I gave them a miss.But with V-mart,say debt equity of .2 and quoting at less than 12 times fy15 earnings with management guidance of 30% CAGR growth for the coming decade, gives me the impression of having a massive probable multibagger.A mere multiple of 15 on fy15 earnings, helps me to arrive at the target price of 325 bucks.

Conclusion:The company bunches store locations of about 150-200 km from each other, allowing economies in sourcing and distribution.Working-capital cycle has remained steady over the years, and is on a par with its retail peers. The company enjoys superior margins in comparison to its counterparts on account of lower rentals and meagre employee cost.V-Mart is now concentrating on high margin apparel and non apparel segment where the gross margins are around 35%,much higher than kirana stores which sees around 13% margin.Company should comfortably generate around 20% ROE in the coming many years.This is a very simple yet an attractive business which has got massive growth potential.The FII's and MF's have bought huge amount of shares from the open market in the last few months.Promoters are neat,visionary and seem committed towards making money for themselves and for the minority shareholders.A scrip which has got all the potential to write a scripture for itself.


 Btw:People looking for midcap/smallcap positional call professional service may rush a mail at my mail id arunsharemarket@gmail.com to know more about it.

53 comments:

Anonymous said...

Hey Arun,
Do Marksans, Suven and Granules feature in your multi-bagger list in pharma space? Also, what about renewable energy stocks like Suzlon and Orient Green? Which counter looks more positive? Have read your Orient Green reco; is it a better bet than Suzlon looking at the market cap?

Thanks.

Anonymous said...

Hi Arun,

What's your take on the cement sector? End of bad phase? Why do you prefer Orient Cement over Mangalam Cement? Financials of Mangalam look much better. And between Kolte-Patil Developers and Godrej Properties, which real estate stock do you prefer. Kolte-Patil seems to be making smart investments and is somehow managing to keep its debt low.

Regards.

Anonymous said...

Hi Arun ji, Can I buy sical logistic at cmp?Whats your view on stock.

Anonymous said...

sir ur view on v2retail....can it be an multibeggar

Anonymous said...

Sir, why dishtv is not performing in current market rally if any fundamental change or any other reason kindly view shall i continue hold ......... Thanks in advance

Paresh Panchal said...

Hello Arun,

Whats your view on JK Udaipur Udyog. Does it have the potential of a multibagger.

Thanks in Advance. Appreciate your work.


Paresh Panchal said...

Also can i go for Federal Bank or South Indian Bank. Or you could suggest a good Stock in Bank Sector.

Thanks again

Anonymous said...
This comment has been removed by a blog administrator.
Arun Mukherjee said...

1)I dont follow Sical.But its better to be with the leaders unless there's some x factor in the smaller bets.

2)I was reading about V2 retail recently.They seem to have learnd their lesson.Results been great so far.Am keeping it under the radar.

3)Once I thought Dish tv to be the next bharti.But Zee group hasnt been that aggresive.Its already facing stiff competition.Still would give it some time to perform considering the massive market size.

4)Don't follow jk udyog so cant comment.

5)South Indian bank looks good.A lot of street smart people have acquired a lot of shares in it over the years.Pays a decent dividend yield too.

Arun Mukherjee said...

1)I liked granules and suven and they were recommended and in due course rewarded folks with great capital appreciation.Marksans I missed at 3 and 5 bucks.Granules and suven can still be great compounders.Would Prefer orient green to suzlon coz of the debt and mcap factor.

2)Prefer orient coz of the restructuring,huge capacity and cheap valuation on a EBITDA/Tonne basis.I bought Godrej coz of the potential and the amazing track record of the ethical group.Asset light biz model helps too.

Anonymous said...

Hi Arun, what is your view on max india. I am holding it since two years

Arun Mukherjee said...

What if I ask you why did you buy it?Must have some reasons for buying max India?What are they?

Anonymous said...

I bought max because it is in good business of insurance.

Anonymous said...

Will u recommend Kalpatru Power @cmo?

Anonymous said...

Hello Arun,

I have 450 Shares of Cairn India which i bought @ Rs360.could you please tell me shall i hold it?and wat price i can expect in another 2 years?

Thanks,
Karthik

Anonymous said...

Arunji,

Your views regarding Ramky Infra?

Anonymous said...

What should we do with hyderabad industries,brandhouse retail, jaibalaji and bhagwati banquets?

Anonymous said...

Pls share you views on "Camphor & Allied Products Ltd."

Anonymous said...

Sir please your view upon gic housing finance

Arun Mukherjee said...

1)Hmm ya max has a decent biz model with insurance been the moolah.At one point of a time I owned few shares too.

2)Ya positive on kec and kalpataru.They have got much better days ahead.

3)From last 2 years am suggesting a switch from cairn to selan.Cairn remained where it was and selan moved from 280 to 550.Switch to selan in dips.

4)Till infra gets fancied ramky wont perform.So a market performer at most.

5)Very bullish on all of them.Brandhouse I dont track.

6)Positive on canfin homes and gic housing finance.

7)Bullish on camphor but not sure why it pays such tiny dividends inspite of massive EPS.

Anonymous said...

Hi Arun, please share your view on sintex and Gujrat siddhi cement

Anonymous said...

Arun, I've been holding HSIL since a year+ now a days only it ran up and came above my purchase price of 115
So @cmp 138, should i remain invested or book teh profit and pick some other better stocks. What do you think?
Thanks,
Mayur

Anonymous said...

Sir pls suggest a good small cap a mid cap and large cap which can give good returns consistently for the next 20 years. Also suggest a small cap which has the potential to become a Blue chip

Anonymous said...

Hi Arun,

Came across your blog today..must commend you for doing so well at such a young age :)).....was pleasantly surprised..keep it up

Was wondering what is your take on Grauer and Weil..that is if you think it is a keeper...

Thanks and Regards,

CHINMOY GHOSH said...

SIR IS HIMALAYA INTERNATIONAL A STOCK FOR FUTURE

Arun Mukherjee said...

1)Dont track gujrat siddhi but positive on sintex.Promoters have bought a lot from markets recently.

2)HSIL consumption theme and every quality consumption play will continue to outperform in the longer run.Say middle class population to jump 10 times by 2025.

3)For 20 years buy piramal enterprises,Thomas cook,hdfc twins,godrej group counters.Well for small caps you can find them in the blog itself.

4)Graur weil story is a good play on rentals but promoters aren't your guys to make you rich.They only care about themselves.If they changes for good,scrip can be a huge counter.

5)Himalaya probably a dubious company.Cant believe a branded fmcg company quoting at such dismal valuatiions.

Anonymous said...

Thank you for your feedback on Grauer & Weil, Arun..

Regards

Anonymous said...

Sir what is your view upon bgr energy is it good time to invest in it at cmp for multibagger return for 2 years please suggest buy or avoid

Gaurav said...

Could you please let me know the prospects of Bafna Spinning Mills....I am holding more than ten lakhs of shares and last it was traded on 17September @ .07. As of now suspended due to penal reasons by BSE. Please assist me what need to be done and when shall this stock start trading yet again.
please guide.
Thanks.

Arun Mukherjee said...

1)Ya bgr looks good for sure.Can invest if got a longer term horizon.

2)What compelled you to buy that wretch?Say bye bye to bafna.Probably wont list again.Cant do anything about it.Learn from your past experiences and dont buy craps again.

Gaurav said...

Thanks for the rapid suggestion Arun.
Hope, regardless of the fact that it's not being traded for quite a long time I can still sell it as I am really unsure about it.

Anonymous said...

Hi Arun ji, can I buy adani port @ cmp and what is ur view on eros media

Anonymous said...

wts ur view on panasonic energy.....thanks for reply....

Anonymous said...

Hi, please share your view on sslt.

Arun Mukherjee said...

1)I too pray you get rid of it.But who will buy?

2)Positive on sesasterlite.Though meddling of govt is a dampener.

3)Ya can buy adani port for the longer term.I have got highest regard for Mr Gautam Adani.Do read the story of the genius.

4)Not tracking panasonic.Will study it and get back to you.

Anonymous said...

i have lost around of 190000/- in the market. Now i have just 100000/- rs. I want to invest it for 2years to a smallcap share to recover the previous amount. I am in very trouble because the whole amount are taken by loan. Pls suggest me.

Anonymous said...

Sir - Your view on Gayatri Projects ?

Anonymous said...

Is it worth to enter in the counter "Plastiblends"?

Anonymous said...

Hi Arun, As cement sector is starting to grow then is it good price to enter in hyderabad industries .will it be Multibagger in cmg years?

Anonymous said...

Arunji is too good. He has given so many multibaggers like concurrent, jai balaji, magnum ventures.
He is doing a wonderful work.

Anonymous said...

what is you view on "Chemfab Alkalies Ltd."?

Anonymous said...

Can we buy Linc pen

Arun Mukherjee said...

1)Hyderbad or HIL is not a cement company but a well regarded roofing solutions, green building material, building material company and cladding material manufacturer company.I like the company a lot but when everything looks up it got a habit of disappointing.

2)Till infra theme plays back,gayatri or any infra company wont perform.

3)Pretty positive on plastiblends.Company has got good potential and merits a watch.

4)I got attracted to chemfab when RJ got in it,but since then yet to perform extravagantly.I dont understand the sector as a whole.Commoditised products hardly gets good valuations.

5)Its better if you say company has got this and this and thus can we buy?Its not like u select something randomly and ask me about it.Be passionate about the subject.

Anonymous said...

Dear arun sir this blog is for investors not for traders then why these big profit buzz company is advatising on this blog and trying to make people fool . Arun sir is enough for investors please don't make to people fool

Anonymous said...

Hi Arun ji, please advice on eros international. Despite very good result it is not moving up. I m holding it since 1 year

Anonymous said...

Hi Arun , I want to invest 100000 in multibagger stocks in small caps, can u plz suggest such stocks for duration of 2 years...

Anonymous said...

your view on Visaka Ind ?.,low promotor holding makes me uncomfortable ....

Anonymous said...

Hey Arun ji, seeking your views on Lloyd Electricals @cmp63, is it worth to enter even at this levels. I saw you recommended around 44 levels. Pls advise.
-Mayur

Anonymous said...

Hello Arun ji, could you please share your views on JBM auto comp? Ppl say that it is a mini Eicher motor in making. Does it have that potential? Thanks in advance. Regards, Yash.

Arun Mukherjee said...

1)Ya pretty positive on jbm auto.Eicher motor story is all about the royal enfield.Not comparable to jbm.

2)Ya positive on lloyd ele.I feel company has got great days ahead.

3)Visaka,sahyadri,HIL all similar types of stories.All will perform once the economy picks up.

4)Tv today,selan,fluidomat,jai balaji good set of multibagger stocks.

5)Always liked the model of eros.Its time they get re-rated.Surely will at some point of time.

Anonymous said...

Hi Arun , I want to invest 100000 in multibagger stocks in small caps, can u plz suggest such stocks for duration of 2 years...

Anonymous said...

Hi arun, can u please provide your views on the companies. For 5 yrs motherson sumi and jk tyre, for 1 month wockhardt, usha martin, essel propack, thanks, shailesh

Aditi jain said...

Hi Arun great scenerio provided regarding retail sector.....Carry on

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