ICICI Securities has upgraded its rating on Avenue Supermarts from ‘Sell’ to ‘Buy’. The brokerage firm is now bullish on the stock and has a target price of Rs 3,900.
The stock zoomed over 9 per cent to Rs 3515.5 against the previous close of Rs 3234.95 on Monday. With a market capitalisation of more than Rs 2,27,ooo crore, the shares are trading higher than 5 day moving averages but lower than 20 day, 50 day, 100 day and 200 day moving averages.
ICICI Securities highlighted that DMart’s stock upgrade is not just because the stock has corrected 45 per cent from its high. A broad-based market correction (and possibly some technical factors) does bring rationality to BAAP (Buy-At-Any-Price) stories.
In FY22-24E, it believes it has value and volume tailwinds: inflation (higher absolute gross profit per unit, operating leverage) and likely higher footfalls as more consumers prioritise value (read lower prices in the trading area).
Furthermore, the brokerage house believes that the company will look to accelerate store expansion and the benefit of the recent expansion is yet to fully kick in тАУ revenue intensity is lower than pre-Covid levels. At 61x FY24E P/E, we find valuations palatable, it said.
“The management has also highlighted that demand for general merchandise and apparel business has still not recovered and inflation is allowing to deliver relatively better value to shoppers and manage costs better,” ICICI Securities said.
Avenue Supermarts Ltd, which owns and operates retail chain D-Mart, on Saturday reported a 3.11 per cent increase in its consolidated net profit to Rs 426.75 crore for the fourth quarter ended March 2022.
The company had posted a net profit of Rs 413.87 crore in the January-March quarter a year ago.
”Two years and older, DMart stores grew by 16.7 per cent during FY2022 as compared to FY 2021. We have 214 stores that are 2 years or older. Our sales from General Merchandise and Apparel moved slightly up at 23.40 per cent as compared to 22.90 per cent in the previous year,” said Avenue Supermarts CEO and MD Neville Noronha.
Promoted by Radhakishan Damani and his family, DMart retails basic home and personal products across markets that include – Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu, Punjab and Rajasthan.
