Motilal Oswal has given Neutral recommendation for Avenue Supermarts with a target price of Rs. 3220 in its research report issued on Jul 11, 2021
Motilal Oswal’s research report on Avenue Supermarts
The revenue recovery in DMART has been much better than that during the previous lockdown, growing 33% YoY (13% below pre-COVID levels). Gross margin declined by 110bp YoY, despite the base quarter having seen a severe impact on the margin accretive Discretionary category due to COVID-19. We have largely maintained our estimates and expect a buoyant recovery from 2QFY22 onwards, factoring in 24% revenue/PAT CAGR over FY20-23E. We see a limited upside given the rich valuations. We maintain our Neutral rating.
We value DMART at 52x FY23E EV/EBITDA (which is around its average multiple of ~57x). We retain our Neutral rating and TP of INR3,220 per share.