Prabhudas Lilladher has given Buy recommendation for Avenue Supermarts (DMART IN) with a target price of Rs. 3360 in its research report issued on May 08, 2021
Prabhudas Lilladher’s research report on Avenue Supermarts (DMART IN)
We cut our EPS estimates by 20.1%/4.7% in FY22/23 due to 1) Weak 1H outlook due to local restrictions 2) lower store opening assumptions by 5 stores each for FY22/23 3) interplay between average bill value and number of orders 4) sales mix impact in FY22 due to lack of non-essential sales. However, we remain optimistic about long term growth story of D’Mart on back of 1) Increasing scale and scope D’Mart Ready (added 4 new cities in FY21, 2) Extending offerings on D’Mart ready app to include general merchandise, 3) Growth in General merchandise sales over lower base, 4) Everyday low value focus and 5) broad based cluster expansion strategy with just 5 store addition in Maharashtra and Gujarat which are 50% of total store count. Worst seems over although near term outlook remains weak due to disruption led by night curfew, weekend closure in certain cities, supply issues in non FMCG goods and mix impact as apparel, laundry, footwear and travel segments remain impacted.
Outlook
We estimate 46.4% PAT CAGR over FY21- 23 and 42.3% over FY21-25. We retain Buy and increase our target price to Rs3360 (Rs3296 earlier).