Target: ₹5,000
CMP: ₹3,601.20
Aditya Vision (AVL), a consumer-durable retailer, holds leadership share of over 50 per cent in Bihar/Jharkhand, aided by low penetration so far, curated assortment, competitive pricing, Buy & Win scheme, and impeccable service/consumer trust.
AVL has passed the litmus test of scale and is now a well-oiled machine to pursue the 5x expansion opportunity in six states of the Hindi Heartland. SSG should remain above 20 per cent in the near term, led by maturing of new stores and low penetration. AVL’s payback period of under 3 years is ‘better-than-the-best’ in other retail formats.
We expect AVL to post a strong, revenue-led EBITDA CAGR of over 30 per cent during FY23-27E and in the mid-teens over FY27-35. Maturing of new stores should lead to better asset sweating and allied ROIC gains (1,000bps+ in FY23-27).
Despite better growth prospects, valuation at 35x 1YF is at 35-50 per cent discount to retail peers’ and provides scope for re-rating. Given higher concentration in Bihar and entry into new regions, we conservatively value AVL at 40x its Dec-25 EPS. We initiate coverage on AVL with Buy and Dec-24 target price ₹5,000 (40x Dec-25 EPS).