Can Lenskart Sustain Its Growth Momentum Amid Heavy Capex and Low ROCE?
About Lenskart
Lenskart is India’s largest eyewear retailer, offering a mix of online and offline sales across spectacles, lenses, and sunglasses. Over the past few years, the company has expanded globally while maintaining a strong domestic presence through its franchise and company-owned outlets.
The brand’s business model combines digital technology with offline experience, though high manufacturing and acquisition-led investments make it capital intensive.
Ambit’s View on Lenskart
- 💡 Initiates coverage with a Sell rating and a target price of ₹337.
- 📈 Forecasts ~20% revenue CAGR over FY25–28, driven by India expansion and rising international scale.
- 🏭 Notes that eyewear being made-to-order, scaling up will require significant new capacity investments.
- ⚙️ In-house manufacturing and acquisitions make the business asset-heavy, impacting capital efficiency.
- 💰 With ₹280 billion planned capex over FY25–28E, free cash flow is expected to turn positive only by FY28E.
- 📉 Premium valuations overlook low ROCE and depend on aggressive growth assumptions.
Ambit highlights that while the growth story remains intact, the risk-reward balance is unfavourable given high valuation multiples and limited near-term free cash flow.
Traders tracking retail and consumer themes can explore setups through the Nifty Trading View for tactical opportunities.
Peer Comparison
| Company | Business Type | EV/EBITDA (FY28E) |
|---|---|---|
| Lenskart | Eyewear Retail | 55x |
| Trent | Fashion Retail | 45x |
| Nykaa | Beauty & Personal Care | 46x |
Ambit notes that Lenskart trades at a premium to Trent and Nykaa despite lower return ratios and delayed free cash generation.
Strengths & Weaknesses
Strengths
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Weaknesses
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While Lenskart’s growth prospects remain strong, capital efficiency and return metrics remain key investor watchpoints.
Opportunities & Threats
Opportunities
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Threats
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Lenskart’s global expansion plan holds promise, but sustained cash burn and high valuation multiples could cap short-term upside.
Valuation & Investment View
- Short-term: Expensive valuation may limit near-term performance.
- Medium-term: Domestic store addition and stable gross margins can support moderate growth.
- Long-term: Sustainable compounding possible post FY28 once free cash flow turns positive.
Analysts tracking consumer growth stories can align trades with BankNifty Trading View for momentum guidance.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, observes that while Lenskart’s category leadership remains intact, investors must weigh its stretched valuations and high capital intensity before committing long-term. Explore more such detailed insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
Related Queries on Lenskart Valuation and Growth
- Why is Lenskart trading at a premium to peers like Trent and Nykaa?
- When is Lenskart expected to achieve positive free cash flow?
- How will global expansion affect Lenskart’s profitability?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions.
