Baazar Model Retail surges 21% in March; JM Monetary tasks over 71% upside with ₹400 goal

Baazar Model Retail, a Jhunjhunwala-backed retail inventory, has surged almost 21 p.c in March, reversing its three-month dropping streak, JM Monetary reported. The inventory had witnessed sharp corrections earlier, falling 22 p.c in February, 13.5 p.c in January, and 10.5 p.c in December. Nevertheless, the latest rally has introduced the inventory again into focus.

JM Monetary Initiates Protection

Not too long ago, JM Monetary initiated protection on Baazar Model Retail with a ‘purchase’ ranking and set a goal worth of ₹400, indicating a possible upside of over 71 p.c from its present ranges. The brokerage expects the corporate to ship income, EBITDA, and PAT CAGR of 30 p.c, 36 p.c, and 50 p.c over FY24-27E, respectively.

In response to JM Monetary, Model Baazar’s RoE and RoIC are projected to enhance to 22 p.c and 19 p.c by FY27, pushed by enhanced profitability and lowered working capital days. The brokerage additionally highlighted that EPS progress in FY25 is prone to profit from larger ROU depreciation and lease legal responsibility curiosity on account of the corporate’s aggressive retailer enlargement plans. Furthermore, the buyout of three leased shops in FY24 will result in lease reversals, additional boosting profitability.

“We imagine, that is additionally one of many key purpose for Model Baazar’s low valuations as reported numbers optically look weak however are sturdy on Pre Ind AS foundation. We provoke protection on Model Baazar with a BUY ranking and a goal worth of ₹400. Constant execution, enhancing profitability and dealing capital days can result in additional re-rating of the inventory,” JM Monetary stated.

Jhunjhunwala’s Stake in Model Baazar and Va Tech Wabag

As of Q3FY25, Rakesh Jhunjhunwala held 27,23,120 fairness shares of Model Baazar, representing a 3.65 p.c stake valued at roughly ₹66 crore.

Funding Rationale

Model Baazar’s Market Presence and Enterprise Mannequin: In response to JM Monetary, Baazar Model is a number one worth style retailer with a robust presence in Japanese India, providing a one-stop-shop expertise for households with inexpensive product ranges. Established in June 2013, the corporate has quickly expanded to 199 shops overlaying 1.8 million sq ft throughout 170 cities as of December 2024. Over 75 p.c of its shops are positioned in Tier 2, Tier 3, and Tier 4 cities, catering to value-conscious customers. The corporate’s product portfolio consists primarily of attire (85 p.c), whereas normal merchandise makes up the rest.

Sturdy Development Potential within the Worth Attire Market: JM Monetary highlighted that Baazar Model is well-positioned to profit from the enlargement of India’s worth attire market, which was value ₹3.7 trillion in FY24. The organised section, valued at ₹1.3 trillion, is predicted to develop at a 17 p.c CAGR over FY24-27, reaching ₹2.1 trillion by FY27. The Japanese market, the place Model Baazar has a robust presence, is projected to develop at a sooner 15 p.c CAGR in comparison with 12-13 p.c for different areas.

Sturdy Execution and Growth Plans to Drive Development: JM Monetary believes Baazar Model’s sturdy execution capabilities give it a aggressive edge. The corporate’s repeat gross sales charge of over 68 p.c displays buyer loyalty, whereas its skill to customise product assortment primarily based on client preferences enhances its enchantment.

The retailer can also be investing in system and course of automation to assist its retailer enlargement plans, enhance unit-level economics, and cut back operational prices. With sturdy unit economics and decrease market penetration, Baazar Model has vital enlargement potential. JM Monetary estimates that the corporate might add no less than 265 new shops within the coming years, backed by rising per capita revenue and concrete improvement. It expects 145 retailer additions over FY25-27E.

Key Dangers to Watch

Whereas bullish on the inventory, JM Monetary cautioned about sure dangers. These embrace excessive income focus (80-90 p.c) from core markets, heavy dependence on attire gross sales, and the intensifying competitors within the worth style retail house. Moreover, the brokerage flagged the danger of unsuccessful personal label launches, which might impression margins, and reliance on a restricted provider base with out definitive agreements, posing potential procurement challenges.

Disclaimer: The views and suggestions made above are these of particular person analysts or broking corporations, and never of Mint. We advise traders to examine with licensed specialists earlier than taking any funding choices.