Lenskart shares rally after CLSA call; can the stock climb another 15%?

Shares of Lenskart Solutions Ltd. edged higher on Tuesday after brokerage CLSA initiated coverage on the stock with an ‘Outperform’ rating and a target price of Rs 604 per share.

The stock gained as much as 1.5 per cent during the day and was trading at Rs 526, up 1.36 per cent, at around 12:56 pm IST. The target price suggests an upside potential of nearly 15 per cent from the prevailing market price.

CLSA sees long-term growth opportunity

In its initiation note, CLSA said Lenskart is well positioned to tap India's growing eyewear market, supported by rising consumer spending and increasing preference for branded products.

The brokerage noted that the company caters to a wide customer base, ranging from affluent urban consumers to emerging middle-income households, while also maintaining an affordable product portfolio.

According to CLSA, Lenskart's strong brand recall and omnichannel business model have helped it establish a leading position in the organised eyewear segment.

Scope for further store expansion

The brokerage believes one of the company's biggest growth drivers will be the continued expansion of its retail network.

Lenskart currently operates 2,609 stores across India. CLSA said there is considerable room for the company to add more outlets while maintaining healthy store-level returns.

The brokerage expects the retailer's physical presence, combined with its online platform, to support customer acquisition and market share gains over the medium term.

Profitability expected to improve

CLSA expects margins to strengthen as the business scales up.

The brokerage highlighted operating leverage and a better product mix as the key factors that could drive earnings growth in the coming years. It also pointed to improving profitability in the company's overseas operations, which are gradually moving closer to sustainable margins.

Risks remain

Despite its positive view, CLSA cautioned that certain factors could affect growth.

These include pressure on consumer spending among lower-income groups, technological disruptions within the eyewear industry and slower-than-expected store additions.

Any delay in expansion plans or a prolonged slowdown in discretionary consumption could impact the company's growth trajectory, the brokerage said.

Elara Capital recently initiated coverage

The CLSA report comes days after Elara Capital initiated coverage on Lenskart with a 'Buy' rating and a target price of Rs 615 per share.

Elara said the company has created a differentiated business model by integrating manufacturing, technology, retail operations and customer engagement.

The brokerage compared Lenskart's opportunity in the eyewear market with the growth journey of Titan Company's jewellery business, stating that the company could emerge as a category leader in organised eyewear, similar to the position established by Tanishq in jewellery retail.

It also highlighted strong store economics, capacity expansion and a technology-led customer experience as key strengths supporting future growth.

The back-to-back bullish initiations by brokerages come at a time when investors are closely tracking consumer-facing businesses with scalable retail models and improving profitability metrics.