Clear vision of growth with moat in place….
About the company: Lenskart Solutions Ltd. (Lenskart) is a leading D2C eyewear player in India and with presence across select international markets. It sells wide range of prescriptive eyewear, sunglasses and contact glasses. India business forms ~60% of the revenues while international business contributes ~40%.
Investment Rationale
• Rising refractive errors and shift to organise players provides large opportunity in the Indian eyewear market: Rising prevalence of refractive errors in India, growing awareness of eyecare and shift to organised players will help India’s eyewear market to grow at CAGR of 13% to Rs.1,48,300 cr over FY25-30, expanding by 3x of the global eyewear industry. Refractive errors amongst the India’s population are expected to go up to 62% by FY30 (will be highest amongst teenagers & children at 75%) from 43% in FY20. Penetration level for eyeglasses in India is low at 35% compared to US and Japan at 88% and 69% respectively. Strong business models are aiding organised D2C players gaining high demand through affordability, omni-channel presence and better services. Organised brand’s share is expected to move to 31% by FY30 from 22% in FY20. Lenskart, with strong business model, domestic manufacturing capacity of 25mn units (another ~50mn unit facility will commence in Hyderabad) and extended store network of 2,725 stores in India (as of Q1FY27), is well capitalised to grab large share in the Indian eyewear market with focus on growing the market share from current ~5% in the coming years.
• AI enabled vertical business model provides strong moat for growth: AI-enabled vertical integration, strong supply chain capabilities, remote eye-testing technology and an omnichannel delivery platform have helped Lenskart build a strong moat through rapid product innovation, lower production costs and wider assortments. End-to-end control over manufacturing and supply chain provides a structural cost advantage, with Lenskart’s cost of materials for eyeglasses stands 35-40% lower than the industry. This along with strong omni channel retail platform enables Lenskart to sell its eyewear products at 50-70% lower than local opticians. This has supported strong customer acquisition, with consolidated annual transacting customers almost doubling to ~16mn in FY26 from 7.7mn in FY23, while eyewear volumes growing by 30.3% CAGR to 35mn units.
• Strong financial track record; industry opportunity and business model will sustain the strong growth ahead: Lenskart’s consolidated revenue grew at a CAGR of 33% to Rs.8,814cr over FY23-26, driven by 30.3% CAGR in sales volumes (with India volumes growing at 28% CAGR). Consolidated store count grew at 19% CAGR over FY23-26, with India stores growing at 23% CAGR. Its vertically integrated business model and omnichannel platform aided gross margins improving to 69% in FY26 (from 64% in FY23) and EBIDTA margins improving to 19.9% in FY26 from 7% in FY23. With store additions across India/international markets expected to grow at 13% CAGR, better product mix through innovation and transacting customers growing at 22% CAGR over FY26-29E, we expect consolidated revenue/EBITDA/PAT to grow at 27%/37%/59% CAGR over FY26-29E. With strong cash generation, we expect Lenskart to cumulatively generate FCF of ~Rs.5300 cr over FY26-29E.
Rating and Target Price: We initiate our coverage on Lenskart with a Buy rating and target price of Rs .850 (valuing at 43x FY28E EV/EBIDTA).
