Prabhudas Lilladher has given Accumulate recommendation for Avenue Supermarts with a target price of Rs. 5359 in its research report issued on Oct 16, 2021
Prabhudas Lilladher’s research report on Avenue Supermarts
We are cutting D’Mart to Accumulate from Buy despite 9.2-11.7% upgrade in FY22-24 estimates and increase in DCF based target price to Rs5359 (Rs4601 earlier) given 26% spurt in stock price in past 6 trading sessions. D’Mart 2Q results depicted strong post Covid recovery with mature store sales growth of 23.7% in Sept, gains from operating leverage with just 3.2% YoY growth in other expenses and soft launch of D’Mart Ready in Surat and Vadodara. With 4 and 8 new stores addition in 1Q and 2Q and capex of ~Rs8.5bn, D’Mart remains on track to add ~35 stores during FY22.
We believe bill cuts/store/day will normalize with lower restrictions however the bill value will get a flip from higher inflation. We expect strong growth as D’Mart is yet to fully sweat 70 stores which were added in FY20/21 and YTD. We estimate 48% PAT CAGR over FY21-24 and remain positive for long term. However, we cut our rating to Accumulate (Buy earlier) given sharp jump in stock price recently.