Buy Avenue Supermarts; target of Rs 5200: Geojit Financial Services

Geojit Financial Services is bullish on Avenue Supermarts has recommended buy rating on the stock with a target price of Rs 5200 in its research report dated May 17, 2024.

Broker Research

May 20, 2024 / 17:09 IST

Buy

26 Aug, 2025 12:21

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Geojit Financial Services research report on Avenue Supermarts

Avenue Supermarts Ltd. (DMart) owns & operates India’s most profitable supermarket chain, DMart. It provides products like food, non-food (FMCG), general merchandise & apparel through 365 stores (total 15.15mn sq. ft). We maintain our BUY rating with a revised target price of Rs. 5,200 owing to strong revenue growth and store additions. Revenue grew by 20%YoY, while gross margin improved by 30bpsYoY to 13.7% due to an improved product mix. Operating profit grew by 20%YoY as the EBITDA margin was maintained at 7.6%. Q4FY24 saw a sustained increase in demand for discretionary products, bolstered by moderating inflation which is expected to enhance profit margins moving forward. DMart continued its strong store additions, adding 41 stores in FY24 (131 in last 3years), which, along with the likely improvement in demand, will aid improvement in topline growth. We expect Revenue/PAT to grow at a 23%/29% CAGR over FY24-26E. DMart currently trades at 84x 1Yr Fwd PE. We value DMart on a DCF basis, which implies 76x on FY26 EPS.

Outlook

DMart 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. DMart is currently trading at 84x 1Yr Fwd PE. We arrive at a target price of Rs.5,200 by valuing on a DCF basis, which implies 76x on FY26 EPS, maintaining our BUY rating.

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