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If there is one example of a Company finding a great balance between control of front-end customer engagement and back-end supply chain management, it has to be Vaibhav Global. Vaibhav Global Limited is an online retailer of low-cost discounted fashion jewelry selling primarily through television and internet in the US and UK.
In their effort to make the transition to an Omni channel player, Vaibhav Global has put in serious investments. Digital accounts for around 36% sales in the fiscal year 2021. Vaibhav Global has hired an experienced management team with backgrounds in digital marketing and sales while offering an expanded gamut of products.
The Company has an excellent direct sourcing network that allows it to price its products competitively. It also owns 3 ISO certified manufacturing facilities that helps it to manufacture high quality products at the best possible prices.
The Teleshopping market is 93% controlled by QVC. Vaibhav Global has a low market share 1-2% across the global teleshopping market. Its differentiated value proposition through deep discounting presents opportunity to grow faster. Vaibhav Global’s future growth is dependent on its ability to keep adding new customers and increase the lifetime value of a customer by increasing retention and repeat purchases.
Vaibhav Global is looking to increase market share in the existing US and UK markets and to enter the German market. It also plans to invest in technology for higher automation, backward integration in non-jewelry products and enhancing customer satisfaction.
Key Moats of Vaibhav Global are: (1) Vertically integrated jewelry manufacturing leading to 60%+ gross margin that is tough for peers to match and (2) Deep discounting model with Average Selling Price almost half of peers (USD25-30) that leads to high inventory turnover and is less affected during financially stretched times.
So what is our view on company valuation?
We believe the company is in a unique position where it can deliver 15% revenue CAGR for the next 5 years with 15% EBITDA margin at more than 30% ROCE and ROE going forward. The Company looks attractive at a P/E ratio of 30x in comparison to the domestic and international peers based on the expected revenue growth. The Stock has increased almost 3x since March 2020, so could be accumulated at a price 20-30% lower than the current level.
The risks to this analysis include the challenging task of diversifying across product categories in a profitable way. Moreover, shifting from Teleshopping to Digital will increase TAM but also expose the company to higher competition from e-commerce retailers.
So, would you invest in Vaibhav Global?
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