Credit Suisse said the key risk is a rise in competitive intensity from a well-resourced competitor and it believes the bigger risk is the rapid expansion of Reliance Retail
Supermarket chain Avenue Supermarts shares fell more than 2 percent in the morning trade on April 26 after global investment firm Credit Suisse has maintained underperform call on the stock.
It has set a price target at Rs 1,150 per share, implying 13 percent downside from current levels.
The stock in last 15 days fell 14 percent. It was quoting at Rs 1,302.00, down Rs 27.25, or 2.05 percent on the BSE, at 1015 hours IST.
Credit Suisse said the key risk to D-Mart operator is a rise in competitive intensity from a well-resourced competitor and it believes the bigger risk is the rapid expansion of Reliance Retail.
Reliance's grocery revenues are now 1.7 times Avenue's estimated grocery revenue and grocery sales grew 65 percent in FY19 against 33 percent for Avenue.
Steep valuation at 67x FY20E P/E is justified if 25 percent CAGR is seen over 20 years, the brokerage said, adding Avenue's new geography expansion will likely dilute financial metrics.
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