Avenue Supermarts Ltd. share price target

Expect Revenue/PAT to grow at 33%/43% CAGR over FY21-24E. We value DMart on DCF basis implying P/E of 85x on FY24 EPS. Outlook improves on reopening of markets The revenue growth was impacted by resurgence in covid cases in recent quarters, but is expected to improve in future due to subside in Covid cases and re-opening of markets coupled with strong store additions in recent quarters. The recovery momentum which was witnessed from Q4FY21 had slowed subsequently due to Covid 2nd & 3rd wave. The current high inflation trend also has an impact on demand in the...

DMart reported revenue growth of 22%YoY (below expectation) supported by recovery in footfalls along with strong store additions in recent quarters. The recovery momentum which was witnessed from Q4FY21 had slowed subsequently due to Covid 2nd wave. Now, the short-term demand outlook is again under pressure due to resurgence of Covid cases in recent months as the footfall will be dependent on local regulations. However, DMart's strong store additions will support future growth when the economy normalises. The recent QIP of Rs.4,098cr is supporting acceleration in store additions. DMart has added 17/29 stores in Q3/9MFY22 & 60 stores in last 2Yrs....

Consensus (continues to) believe that DMart is a linear and secular growth story. We disagree. This analyst's >20 years Consumer experience suggests that in India, nuances matter more. We disagree with consensus' over-enthusiasm of BAAP. SELL. Watch-out for DMart (and modern retail) potentially getting disrupted like how India skipped wireline penetration and jumped directly to wireless.

D-Mart has progressively enhanced its return ratios (RoIC: 20%+) despite being capital intensive (follows ownership model) Robust store operating metrics (breakeven in 18-24 months of its operations...

We remain optimistic on D'Mart post 3Q results as it has reported strong growth despite higher inflation and lower mobility impacting sales of nonessentials like apparel and general merchandise (440 bps decline in sales share to 22.9% in FY21 also). 3Q margin expansion of 26bps led by cost control shows the robust business model despite deterioration in sales mix...

DMart reported revenue growth of 46%YoY supported by recovery in footfalls. Additionally, DMart had added 22 new stores in FY21 which also supported the growth. Covid 2nd wave had slowed the strong recovery momentum witnessed in Q4FY21. However, ease in restrictions and lockdowns in the quarter supported for more footfalls and improvement in sales. The company continued new store additions despite challenging conditions and added 8 stores Vs 6 stores YoY (4 QoQ). The recent QIP of Rs.4,098cr is supporting acceleration in store additions. DMart, improved its focus on E-Com business and continued its expansion by soft launching DMart Ready'...

We revise our estimates leading to an upward revision in our target price to Rs 3,600/share (prev Rs 3,110) valuing at 45x FY24E EV/EBITDA. We downgrade the stock to SELL from HOLD earlier.

Robust store operating metrics (breakeven in 18-24 months of its operations and one of industry best revenue per sq ft: | 32000+) Q2FY22 Results: Operating performance better than consensus estimates as...

Revenue growth tracking well; DMART Ready expands into two new cities Standalone revenue grew 47%YoY to Rs 76bn during 2QFY22 (13% 2-year CAGR) driven by easing of lockdown related restrictions during the quarter. Revenue from 2 year and older DMART stores (186 stores are >2 year old) grew 24% in Sep'21 vs Sept'20. Revenue per square feet rose by 27%YoY to Rs 8,103. Revenue from subsidiaries rose 58%YoY to Rs 1.4bn driven by strong pick-up in the e-commerce business. DMART added 8 stores during the quarter of average size 53,750 square feet. DMART has done soft launch of DMART Ready in Surat and Vadodra....

Avenue Supermarts (DMART)'s consol EBITDA/PAT grew >2x YoY on strong revenue recovery of 47% YoY (30% above pre-COVID levels). This was coupled with healthy improvement of 40bp/240bp in gross/EBITDA margins, as opex cost optimization was much better than expected. We revise our FY22/FY23 EBITDA/PAT estimates by ~15%, largely extrapolating current cost efficiencies, even as sharp revenue recovery was built into our estimates. We factor in an FY2024E revenue/PAT CAGR of strong 27%/31% as we see a limited effect on growth despite the COVID-19...