Shares of Avenue Supermarts, which owns and operates India’s most profitable supermarket chain DMart, edged higher on June 20 after the company informed that it has opened a new store at Mettupalayam, Coimbatore in Tamil Nadu.
The recent launch has taken the total number of DMart stores across the country to 369.
At 9:44 am, Dmart shares were trading 1.2 percent higher at Rs 4,994.10 apiece on the National Stock Exchange (NSE). So far this year, the stock has rallied over 22 percent, beating benchmark Nifty's return of 8 percent during this period.
According to Geojit Financial, Avenue Supermarts has strong growth potential given its healthy balance sheet with no debt and strong operational efficiency.
"Strong store additions will aid future revenue growth, while moderating inflation will improve discretionary demand and margins," it said in a report earlier.
The discretionary mix is expected to improve going forward, aided by moderating inflation, which will improve margins in the coming quarters, the brokerage noted.
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Nuvama Institutional Equities pegs an addition of 85 more stores by FY26, which along with a pickup in the share of General Merchandise & Apparel (GM&A) in the mix, is expected to aid the company's margins.
JPMorgan believes that the underperformance from DMart's apparel segment is now behind. The foreign brokerage also sees a favourable risk-reward for Avenue Supermarts with a view that the business is set-up well for acceleration.
Confident of the D-Mart operator's future growth trajectory, JPMorgan recently upgraded the stock to an 'overweight' call while raising its price target to Rs 5,400 on the side.
The brokerage premised its upgrade on the confidence that D-Mart will likely deliver revenue growth in the high teens over the medium term. The company's ability to ensure offering the lowest prices is another big positive, giving it a key competitive advantage over peers, JPMorgan highlighted.
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Amnish Aggarwal of Prabhudas Lilladher said that DMart has a huge runway to grow with over 1,500 store potential in the duopoly market and scale up in DMart Ready.
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