Avenue Supermarts Ltd. share price target

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...

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...

2nd wave impacts recovery, long-term view intact Avenue Supermarts Ltd (DMart) owns & operates India's most profitable supermarket, DMart. It provides products like Food, Non-Food (FMCG),...

Accelerated store addition to spur revenue growth the D-Mart' brand with a core focus on value retailing. D-Mart, through its proven business model, has been able to maintain consistent profitability and remains an exceptional performer in its peer group. D-Mart has progressively enhanced its return ratios (RoIC: 20%+) despite...

We believe is fairly valued given store revenue growth while store expansion may moderate in the near to medium term due to the pandemic-induced uncertainties and consequent lockdown restrictions. We increase our target price to Rs 3,110/share (prev - Rs 2,890/share) valuing at 40x FY24E EV/EBITDA

The revenue recovery in DMART has been much better than that during the previous lockdown, growing 33% YoY (13% below pre-COVID levels). Gross margin declined by 110bp YoY, despite the base quarter having seen a...

DMart reported healthy revenue growth of 18%YoY Vs. de-growth in the first two quarters. The overall sales was trending very close to pre-covid levels in the quarter and witnessed revival in discretionary products also, but on account of Covid second wave, significant disruptions have been witnessing since March 2021. ~80% of the stores are operating fewer hours than they normally do. The company has added 13 stores in Q4FY21 (22 stores in FY21 Vs 38 in FY20). The store additions are also likely to be impacted by the second wave in the short-term. However, we do not expect disruption like last year. The recent QIP of Rs.4,098cr will support future growth....

We expect the company to continue a healthy growth trajectory going forward on the back of further easing of lockdown and revival in discretionary sales such as apparel, laundry, footwear, travel and such relevant out-of-home usage categories.

The company accelerated its store addition pace with opening of 13 D-Mart stores in Q4FY21 (FY21: 22 stores). Capex also crossed last year's figure (| 2029 crore vs. 1712 crore in FY20). CWIP was at ~ | 1020 crore vs. | 364 crore in FY20, which indicates healthy store addition pipeline in FY22E. The company added ~1 million square feet during the year and also converted two stores to fulfilment centres (FC) to scale up its e-commerce business. Following subdued store addition pace in FY21E, we expect it to make up for the same in FY22E. We bake in 80 incremental stores in FY22-23E...

The EBITDA margin was 80bp higher v/s pre-COVID levels, highlighting sustainable cost optimization during the pandemic period. Given the return of COVID-led lockdown, we cut our revenue/PAT estimates by 17%/21% for FY22, but largely maintain our FY23E estimates, factoring in a 23% revenue/PAT CAGR over FY2023E. Maintain Neutral....