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Mar 21, 2017 03:09 PM IST | Source: CNBC-TV18

Don't chase D-Mart stock over Rs 550/share: SP Tulsian

SP Tulsian suggests investors to stay cautious and advises long-term investors to buy the stock at Rs 500-515 with a view of one year.

Avenue Supermarts is one of the best plays in the modern retail space, say analysts. And, those who got the shares allotted at the initial public offering (IPO) have hit a jackpot with the company's shares listed at Rs 604.4 on the BSE.

The stock touched an intraday high of Rs 615 (up 105.68 percent) and low of Rs 558.75 (up 86.87 percent) after opening.

However, SP Tulsian of said in an interview to CNBC-TV18, to remain cautious on the stock.

Should investors chase the momentum? "Don't chase the momentum above Rs 535 to Rs 550," advises Tulsian.

He suggested long-term investors to buy the stock at Rs 500 to Rs 515 with a view of one year.

Tulsian explains

The operator of supermarket retail chain D-Mart has shown a good growth momentum and reported compound annual growth rate (CAGR) of 24 percent on the topline and 36 percent on the bottomline in the last four years.

Tulsian expects CAGR of at least 25 percent on the bottomline and 20 percent on topline for the next three years. Hence, he suggested that the stock at Rs 500 for the time being is a reasonable valuation.

The stock will not fall below Rs 500, he added.

According to analysts, the growth momentum of the company will continue because of its focus on value retailing, cost controls and it is conservative on store opening model.

Avenue Supermarts has a cluster based store expansion approach and it owns most of its stores.

The Rs 1,870 crore IPO of Avenue Supermarts was open for subscription during March 8-10 and the price band was at Rs 295-299 per share.

The IPO was the biggest since PNB Housing Finance's Rs 3,000 crore offer in October last year.
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