DMart gains 2.5% after CLSA reiterates 'high conviction outperform' rating on stock, sees up to 61% upside

DMart gains 2.5% after CLSA reiterates 'high conviction outperform' rating on stock, sees up to 61% upside

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26 Aug, 2025 12:21

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DMart-parent Avenue Supermarts shares rose 2.5% to Rs 3,913 apiece after global brokerage CLSA reiterated "high conviction outperform" rating on the stock.

Avenue Supermarts is among CLSA's top picks in large-cap consumer space.

The brokerage said DMart's expansion-led negative free cash flow is likely to reverse as store additions normalise, mirroring global peers Walmart, Costco, BIM.

Early expansion years typically see negative free cash flow due to rapid store additions. As expansion normalises, free cash flow turns strongly positive, said CLSA.

CLSA kept the stock's target price unchanged at Rs 6,300, which implies up to 61% upside, and sees strong long-term free cash flow potential.

CLSA expects Avenue Supermarts' FY25-28 revenue CAGR of 15-20%, driven by 155-225 new store openings.

CLSA forecasts FY28 EPS at Rs 30.2 vs Rs 16.9 in FY24 and PE multiple to ease from 227x to 127x.

India’s consumption outlook remains strong and DMart has a deeply moated business model, said CLSA.

So far in 2025, the stock rose 9.5%.

Avenue Supermarts has reported a 15.43% rise in its standalone revenue from operations to Rs 16,218.79 crore for the second quarter ended September 30, 2025.

The total number of stores as of September 2025 stood at 432.

Promoted by Radhakishan Damani and his family, DMart retails basic home and personal products across markets, including Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu, Punjab and Rajasthan.