Neutral Avenue Supermarts; target of Rs 4100: Motilal Oswal

Motilal Oswal's research report on Avenue Supermarts

Avenue Supermarts (DMART) posted an EBITDA/Adj. PAT growth of 33%/ 30% YoY (11%/14% miss), respectively, in 2QFY23. Revenue per store was up 9% YoY/10% v/s pre-Covid, but revenue/sqft was still 10% below pre-Covid level of 2QFY20 due to higher store size and inflationary pressure seen in non-food category. However, store additions remained strong and DMART added eight stores during the quarter. Lower footfalls, weak demand in the non-food (discretionary) category and higher store size impacted store productivity adversely in 2QFY23, but revenue per store recovered to 10% above pre-Covid level. We factor in our FY22-24E EBITDA/PAT CAGR of 45%/51%, with a 19% footfall CAGR.

Outlook

We value the company at 50x EV/EBITDA on FY24E basis and maintain our Neutral rating, with a TP of INR4,100 , given its rich valuation.