Multi Baggers

Vaibhav Global is an electronic retailer of fashion jewellery and lifestyle products in the US and UK markets, selling on its proprietary TV shopping and web platforms with direct access to almost 100 million TV households. The Company delivers deep value proposition to discount seeking customers and has organically developed a robust B2C franchisee in its focus markets. VGL has expanded its portfolio, focusing on adjacent product categories that target similar market segments. While fashion jewellery forms a large part of the portfolio, the company also sells lifestyle accessories, home textiles, kitchenware and cosmetics, all of which are targeted at the same customer and enable access to a larger part of the customer’s shopping value pie.

Healthy Financial performance: In Q2FY19, company’s revenues grew 28% to Rs.452 crore driven by strong growth in both retail and B2B businesses. Retail growth was based on volume expansion across both geographies - US and UK and both sales format - TV and web. Retail revenue grew 26% YoY in INR terms with web and TV growing at strong 32% and 23% respectively. In constant currency terms company delivered 14% revenue growth in US and 24% in UK which is ahead of the growth guidance shared by company earlier. During the quarter, gross margins were at a healthy 62%. EBITDA during the quarter increased by 77% YoY to Rs.55 crore, as company expanded margins by 340 basis points to 12.2% while PAT grew by 96% to Rs.39 crore during the Q2FY19.

Increasing market share: Since last 12-13 quarters company have been gaining market share. Company’s market share in US and UK together accounts for around 2.3% presently against 2% last year. Given low cost structure along with proximity to the sourcing channels which enable company to sell cheaper than its peers, & its agility to be able to sell through social media, through market places, company have an advantage over its competitors in terms of gaining market share. Also, in Q2FY19, company added over 42,000 new registrations and is now catering to over 329,000 unique customers on an annualized basis. Average annualized quantity purchased by each customer has increased to 29 pieces in Q2 FY19 versus 28.3 pieces in Q2 of last year & company’s overall customer retention rates stood at 46.4% in US and 54.3% in UK.

The company is currently trading at 16.25 of TTM eps of Rs 44.92 while it is trading at 16x of FY19E eps & 13x of FY20E eps. Company has shown stellar financial performance in Q2FY19 & will continue to derive significant benefits of operating leverage on a fixed cost base. Given company’s unique vertical business model, strong financial performance & upcoming festive season in the US and UK which is seasonally the strongest quarter for company, we expect company to continue its healthy financial performance going forward. Hence we recommend ``Buy`` on the stock with price target of Rs 840 for long term horizon.

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