Investors who have been allotted Avenue Supermarts shares can look at booking partial profits. The floor price for the stock could be somewhere around Rs 450-500.
It didn’t come as a surprise to investors who placed their bets on Avenue Supermarts IPO, the operator of supermarket retail chain D-Mart on Tuesday, which got listed at a premium of over 100 per cent from its issue price of Rs 299
The big question now is – what should investors do? Should they book profits, buy on declines or hold them? The answer to this question depends on the kind of investor you are.
The stock is among the first to list with gains of over 100 per cent in the financial year 2017, followed by Quess Corp which listed at a premium of 57 per cent, Thyrocare Technologies rose 48 per cent recorded listing gains of nearly 50 per cent.
D-Mart, parent Avenue Supermarts hit D-Street earlier in the month to raise Rs 1,870 crore which got subscribed a staggering 104.48 times at the end of the three-day bidding.
“This listing will certainly qualify as the biggest listing of recent times in subscription and listing gains terms,” Jimeet Modi, CEO, SAMCO securities told Moneycontrol.com. “D-Mart is a very well run retail store chain with 118 outlets on pan India basis with PAT growth of nearly 50%,” he said.
Who can book profits?
Investors who have been allotted Avenue Supermarts shares can look at booking partial profits. The floor price for the stock could be somewhere around Rs 450-500. If it goes beyond Rs 500, the valuations might look stretched at current growth rate.
“The enterprise value (EV) of closer to about Rs 19,000 crore at an issue price of Rs 299 and if you take the listing at Rs 500, probably you get a valuation of about Rs 30,000 crore on EV basis for the stock which definitely makes it fully priced,” SP Tulsian of sptulsian.com said in an interview with CNBC-TV 18.
D-Mart has the scale advantage which they would continue to enjoy going forward as well. The pedigree of the management and the recent track record of earnings reflect a robust picture.
Given the fact that markets are trading at record highs thanks to excess liquidity, D-Mart could well underperform the moment tide reverses.
“Medium and short term investors/traders should at least book partial profits as in medium term D-Mart stock can underperform given its stretched valuations and also the market is consolidating after making a fresh high,” added Modi of Samco Securities.
Who should ‘Buy on dips’ or ‘Hold’:
Investors who have not been allotted shares can look at entering the stock on dips towards Rs 500-530 levels and hold for a period of 1 year, because it is still a good long-term story, suggest experts.
“I will not advise investors to chase the momentum definitely above Rs 550 or maybe Rs 535. If you are a long-term investor, a range of Rs 500-515 can be taken as nice entry point for an investor with a holding period of 1 year,” advises Tulsian.
D-Mart is one of the better plays in the modern retail space. It has reported very strong growth in both top lines and bottom line. It is a very well run retail store chain with 118 outlets on pan India basis with a net profit growth of nearly 50 per cent.
“The company has multiple growth drivers along with strong management profile which should keep the stock going,” Jubil Jain, Equity Research Analyst, PhillipCapital (India) said in an interview with CNBC-TV 18.“The stock at the time of listing at Rs 299 and at that time it was a blind subscribe but at Rs 560, it is trading at 40xFY19 earning. I would be slightly cautious here, but it is still a good long-term story and investors can look for buying the stock on dips,” he said.