Prabhudas Lilladher has given Buy recommendation for Avenue Supermarts (DMART IN) with a target price of Rs. 5118 in its research report issued on Sep 30, 2022
Prabhudas Lilladher’s research report on Avenue Supermarts (DMART IN)
We are upgrading our EPS estimates (2.8%/4.2% for FY23/24 and introduce FY25 EPS estimate) and our DCF based target price to Rs5120 (Rs4636 earlier). we believe D’Mart will gain significantly in FY23 from throughput in stores opened during covid. We remain confident that the company’s strategy of “Everyday Low Prices” (EDLP) will push sales during current high inflation scenario and will attract the middle-class to organized retail from unorganized retail. With a strong balance sheet and the efficient execution capability of the management, we expect sustained growth in coming years. We are positive on D’Mart Ready as sales double in FY22 (Rs1.4bn in FY19 to Rs16.6bn in FY22), operations extend in 12 cities and pick-up points increase to 519. Management seems more confident of the scalability of this format, we expect it to achieve sales of Rs54bn with EBIDTA breakeven in FY25. Also with the festive demand hitting, D’Mart will witness strong growth in the zero covid restrictions environment. We believe D’Mart has a huge growth runway ahead given low probability of heightened competition in modern trade, 1500+ store potential in existing clusters (current stores 294) and gradual scale up in D’Mart Ready.
Outlook
We estimate 42% PAT CAGR over FY22-25 and retain BUY with rise in DCF based target price to Rs5118 (Rs4636 earlier).