Recommendation from Retail Sector
This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.
VAIBHAV GLOBAL LTD.: MAKING SPARKLING PROGRESS
HERE IS WHY
✓Strong financial performance
✓High returns on capital employed
✓Huge growth opportunities
Vaibhav Global Limited (VGL) began its journey from being a conventional gemstone exporter and then moving on to become a studded jewellery exporter to various brands on an international level. It follows both the B2B and B2C business model. It is an omni-channel electronic retailer that offers fashion jewellery, accessories and lifestyle products in developed markets such as the US and the UK. Through its TV home shopping networks – Shop LC in US, Shop TJC in UK and Shop LC in Germany, it reaches out to about 12.7 crore households, thus making it a very marketable brand.
Looking at the financials, the company recorded net sales of ₹ 2,540 crore in FY21 compared to ₹ 1,986.5 crore in FY20 that cloaked a high growth of nearly 27.8 per cent. With its asset-light operating model, the company is able to sell at reasonable prices. Its revenue from television and website has grown exponentially. Its budget pay sales feature, which refers to products offered on EMI basis, has been the highlight of the year that contributed 36 per cent in retail revenue. The EBIDTA jumped by Total Income 750.41 634.79 682.05 665.89 724.96 Other Income 0.66 5.92 6.57 6.92 3.64 Operating Profit 85.60 72.74 97.82 85.21 126.31 Interest 1.63 1.55 0.76 1.58 0.95 Net Profit 69.30 42.13 98.74 56.00 92.32 Equity 32.75 32.68 32.62 32.54 32.51 Last Five Quarters (₹ /Cr) ( Consolidated) Particulars Dec-21 Sep-21 Jun-21 Mar-21 Dec-20 CMP (₹ ) Monthly Stock Market Returns 40 per cent in fiscal 2021 to reach ₹ 388 crore. Also, the net profit stood at ₹ 272 crore while it stood at ₹ 190 crore in FY20.
PAT has grown by 43 per cent. On the liquidity front, the cash flows from operating activities increased from ₹ 213.5 crore in FY20 to ₹ 326 crore in FY21 by 52.5 per cent. For the quarter ending December, revenue grew by 3.51 per cent YoY to ₹ 740.41 crore. On a sequential basis, the top-line was up by 18.22 per cent. The festive season had been encouraging the revenues. PBIDT (exclusive of other income) was reported at ₹ 85 crore, up by 27.13 per cent QoQ and the corresponding margin was reported at 11.32 per cent, contracting by 560 basis points YoY mainly due to demand-supply mismatch, elevated sea freight and increased spending on digital marketing.
PAT was reported at ₹ 69.30 crore, down by 25 per cent from ₹ 92.3 crore in the same quarter for the previous fiscal year. The PAT margin stood at 9.24 per cent in Q3FY22, contracting from 12.74 per cent in Q3FY21. On the returns front, the ROE was 32.3 per cent and the ROCE was even higher at 37.3 per cent. The stock is trading near the PE level of 28.6. The company has negligible debt in the books and so the financing cost is minimal. It has a dividend yield of 1.08 per cent. The company had planned expansion in other geographies like Germany, which it has delivered on promise. The expansion has led to 20 per cent rise in total addressable market (TAM).
Apart from geographical expansion, the company is also investing in new over-the-air (OTA) homes, digital marketing, and OTT marketing, which is expected to support growth in the future. These investments have already added 5 per cent more unique customers in Q3. Digital retail has been trending across the market places. The company is currently in the expansion phase which bears huge potential to grow in the mid to long-term period. By virtue of all these factors, we recommend our reader-investors to BUY the scrip.
