Prabhudas Lilladher has given Buy recommendation for Avenue Supermarts with a target price of Rs. 5121 in its research report issued on Oct 16, 2022
Prabhudas Lilladher’s research report on Avenue Supermarts
We remain confident of the long-term growth story of D’Mart led by aggressive store expansion and strong demand recovery in the coming festive season. Hence, we retain our “Buy” rating. Average system wide sales/store at Rs357mn were 8% higher than 2Q20, despite store additions in past 6 months. The discretionary non-FMCG is on a recovering track, although lags the pre covid levels. Currently, footfalls are lower than precovid levels and basket values are high. As the footfalls improve, discretionary non-FMCG segment is expected to do better. D’Mart maintained it gross margins at 15.1%, as estimated by us, while EBITDA margins slipped by 29bps YoY led by high other expenses. We estimate 39% YoY PAT growth for the 2nd half of FY23 and 42% PAT CAGR over FY22-25.
We believe D’Mart has a huge runway to grow with 1500+ store potential (current stores 302) in a consolidated market of modern retail trade, gradual scale up in D’Mart Ready and increase in share of general merchandise and apparel segment. We retain BUY with DCF based target price of Rs5,121.