Lenskart stock peaks on 610bps international margin jump
Lenskart Solutions shares surged to a 52-week high after its international business delivered a sharp margin expansion that eases doubts about the profitability of its overseas expansion.
Lenskart Solutions shares jumped to a 52-week high of ₹627 on Thursday, extending gains to nearly 50% above its public issue price. The rally followed a June quarter earnings report that showed consolidated revenue growing 34% year-on-year to ₹2,714 crore, while consolidated Ebitda (pre-Ind AS) nearly doubled to ₹361 crore.
The primary catalyst for the market reaction was a 610 basis point expansion in international Ebitda margins (pre-Ind AS) to 10.6%. This improvement was driven by operating leverage, as constant-currency revenue growth of 29% came entirely from same-store sales. Eyewear unit volumes grew 37.6% overall. "Margin improvement in international business should put a key investor concern to rest," said Jefferies India.
The overseas growth was broad-based, spanning Japan, Southeast Asia and West Asia. Lenskart intends to replicate its domestic playbook in these markets, with the broker noting the company will prioritize accelerating growth in Thailand in the coming years.
The domestic business remains the largest revenue contributor at 57% of total sales. India same-store sales growth accelerated to 18% from 16% a year earlier, pushing domestic Ebitda margins up 210 basis points to 15.4%.
The company converted 82% of its Ebitda into operating cash flow of ₹297 crore. Free cash flow declined as Lenskart deployed capital for expansion, opening 116 stores in India and 16 abroad during the quarter. Investors generally tolerate growth-related capital expenditure over maintenance spending.
The domestic footprint now totals 2,725 stores versus 734 abroad, with management suggesting a long-term target of 10,000 locations in India. Sustaining the profitability of these newly opened stores remains a key metric for the market to monitor.
Looking ahead, the company faces lingering questions over its reliance on Chinese imports, a vulnerability it is attempting to address by localizing its eyewear manufacturing. On the product front, management noted that its ₹500 eyewear range generates higher percentage margins, even if premium products yield more in absolute rupee terms.
