Vishal Mega Mart shares gain as Jefferies, Morgan Stanley suggest up to 51% upside

Vishal Mega Mart Ltd shares gained 2 per cent in Thursday's trade after foreign brokerages Jefferies and Morgan Stanley shared positive takeaways following the company's analyst meet, highlighting Vishal Mega Mart's store expansion plans, double digit same-store sales growth (SSSG), new formats, private labels and operating leverage.

Jefferies retained its 'Buy' rating on the stock with a price target of Rs 160, while Morgan Stanley maintained its 'Overweight' rating with a price target of Rs 146. At the prevailing price of around Rs 106, the targets imply potential upside of around 51% and 38%, respectively.

Vishal Mega Mart shares rose 1.69% to hit a high of Rs 108.20 on Thursday, compared with their previous close of Rs 106.40.

Store expansion remains a key growth driver

Jefferies said Vishal Mega Mart has a clear path to expanding from 833 stores to 2,000 stores over time, with the existing format supporting more than 100 annual store additions. The brokerage noted that smaller-format stores are currently being piloted in Uttar Pradesh and Haryana and could eventually expand to around 4,000 stores.

Morgan Stanley also highlighted management's guidance of 100+ store openings annually for the current format, along with four to five openings per quarter for smaller-format stores.

The company continues to target double-digit SSSG for FY27, with management highlighting that the festive season this year has been delayed to the third quarter compared with the second quarter last year.

Jefferies sees strong growth runway

Jefferies said Vishal Mega Mart's growth runway remains supported by store expansion, refurbishments, private labels and quick commerce.

"VMM sees a clear path from 833 stores now to c2k stores over time, with existing format supporting 100+ annual store adds," Jefferies said.

The brokerage also noted that store refurbishments are emerging as an additional growth lever, with refreshed stores driving 10-15% sales uplift, and in some cases, up to 40%.

Quick commerce business reaches cash break-even

Another key takeaway from the analyst meet was the progress in Vishal Mega Mart's quick-commerce business.

Jefferies said quick commerce currently contributes around 2-10% of store revenues, while the overall contribution remains below 4%. The brokerage noted that the business is already cash break-even, with younger and affluent customers largely incremental to the existing customer base.

Morgan Stanley similarly noted that Vishal Mega Mart's online channel is at cash break-even, with FMCG products accounting for a larger share of digital sales compared with apparel.

Private labels remain a key differentiator

Private labels continue to be an important part of Vishal Mega Mart's business model. Jefferies said private labels account for more than 60% of FMCG volumes and 74% of general merchandise sales.

The brokerage highlighted that private-label penetration exceeds 90% in categories such as cookware, furnishings and select household products. FMCG private-label margins are around 2x national brands, while general merchandise margins are about 3-3.5 percentage points higher than branded products, Jefferies said.