- Motilar Oswal initiates coverage with a 600 ₹ target – ~25% upside from current levels.
- Projected 25% CAGR in revenue and 53% CAGR in pre‑Ind AS EBITDA through FY28.
- Valuation sits at a 42x FY28E EV/EBITDA premium, justified by a low‑competition moat.
- Bull case pushes the price to 735 ₹; bear case caps it near 395 ₹.
- Free‑cash‑flow will be capex‑heavy until FY28, then could hit 65‑70% of EBITDA.
You missed the last wave of Lenskart’s rally, and now the price is climbing again.
Why Lenskart's 25% Revenue CAGR Is a Game Changer
Motilal Oswal’s research hinges on a core premise: Lenskart operates in a structurally under‑penetrated eyewear market where demand outpaces supply. By centralising manufacturing, the company extracts ~15% cost advantage versus fragmented local players. This architecture fuels a projected 25% compound annual growth rate (CAGR) in pro‑forma consolidated revenue from FY25 through FY28. In plain terms, if the company posted 10 bn ₹ revenue this year, it could eclipse 20 bn ₹ by FY28 – a scale that most Indian retailers only dream of.
Two levers drive this growth:
- Volume Expansion: Aggressive store roll‑outs paired with a robust e‑commerce platform push unit sales higher.
- Product Mix Upgrade: Premium lenses and branded frames carry higher margins, lifting the top line without proportionate cost hikes.
How Lenskart's Margin Expansion Beats the Retail Benchmark
The brokerage forecasts a 625‑basis‑point swing in operating leverage, taking pre‑Ind AS EBITDA margins from the current ~15% to roughly 21% by FY28. The math matters: a 100‑basis‑point margin uplift on a 20 bn ₹ revenue base adds 20 mn ₹ of operating profit each year. What fuels this margin lift?
- Manufacturing scale reduces per‑pair cost.
- Data‑driven inventory management cuts dead‑stock.
- Higher‑margin private‑label brands under the “house‑of‑brands” strategy.
Compared with peers like Tata’s Croma or Adani’s retail arm, Lenskart’s EV/EBITDA multiple is 18% higher, but the premium is underpinned by a 0.8× FY28E EV/EBITDA‑CAGR ratio versus 1.1‑3.0× for fashion and grocery giants. In other words, you pay less for each point of growth.
Competitive Landscape: Tata, Adani, and the Eyewear Gap
While Tata and Adani are expanding into general retail, neither has a dedicated, vertically integrated eyewear platform. Lenskart’s moat consists of:
- End‑to‑end control from lens grinding to final retail.
- Proprietary AI‑driven fitting tools that lower return rates.
- A network of over 800 stores plus a high‑conversion online funnel.
This scarcity of organized competition means Lenskart can command pricing power and retain customers longer than a typical fashion retailer where churn is high.
Historical Parallel: Online‑to‑Offline Disruptors
Look back at the rise of online‑to‑offline (O2O) players like Nykaa and BigBasket. Both debuted with modest valuations, but a clear growth narrative—paired with capital‑intensive infrastructure investments—allowed them to leap‑frog traditional players. Nykaa, for instance, moved from a 1.1× to a 3× EV/EBITDA multiple as its revenue CAGR accelerated from 20% to 45%. Lenskart mirrors that trajectory: early capex drags free‑cash‑flow, but once the Hyderabad plant reaches capacity, cash conversion should surge to 65‑70% of EBITDA, echoing the post‑FY28 cash dynamics seen at Nykaa and BigBasket.
Investor Playbook: Bull vs Bear Scenarios
Bull Case (735 ₹ target): Assumes India revenue CAGR of 27%+, EBITDA margin of 22%+, and timely capex execution. The upside comes from stronger‑than‑expected volume, faster margin expansion, and a premium‑priced brand portfolio.
Base Case (600 ₹ target): Relies on the brokerage’s 25% revenue CAGR and 21% EBITDA margin. The current price already embeds a 23% revenue CAGR, leaving a 2% upside gap for growth acceleration.
Bear Case (395 ₹ floor): Triggers if revenue growth stalls below 20% or margin compression exceeds 100 bps due to supply‑chain shocks. A prolonged cash‑flow crunch before FY28 could also pressure valuations.
- Actionable takeaways:
- Consider a phased entry: start with a modest position near current levels (≈ 490 ₹) and add on dips.
- Monitor capex milestones at the Hyderabad facility; missed targets are a red flag.
- Watch margin guidance quarterly – a 100‑bps beat can justify a price swing of 20‑30 ₹.
Bottom line: Lenskart sits at the intersection of high‑growth, defensible moats, and a valuation premium that rewards execution. For investors who can tolerate near‑term cash‑flow pressure, the upside potential remains compelling.