Neutral Avenue Supermarts; target of Rs 3500: Motilal Oswal

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Motilal Oswal's research report on Avenue Supermarts

Avenue Supermarts (DMART)’s EBITDA grew 21% YoY driven by aggressive store expansion (21 stores in 4QFY22) and healthy cost optimization, following a weak SSSG that softened revenue growth. Despite the stock correcting more than 35% since its peak, the valuation remains expensive. Further, management commentary remains mixed as it points to robust recovery in Mar’22 but raises concerns of a shift in ecommerce along with an adverse impact of inflation-led consumption.

Outlook

We factor in FY22-24E EBITDA/PAT CAGR of 45%/49% (on consol. basis) with a strong 17% footprint CAGR, but maintain our Neutral rating on the stock with a TP of INR3,500.

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