Sell Avenue Supermarts; target of Rs 1750: HDFC Securities

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

live

• bselive
• nselive

Volume

Todays L/H

More

×

HDFC Securities' research report on Avenue Supermarts

4Q performance was certainly un-DMARTesque as one would’ve hoped D-MART to benefit from excessive hoarding of essentials by consumers during the COVID19-led lockdown. Alas, top-line grew 23% YoY in 4Q (11% YoY in March-20) to Rs. 61.9bn. Bigger disappointment was on the gross margin front (13.2% vs HSIE: 14.1%) as skew of lower margin Food/Non-Food FMCG increased by 670bp to 77.7% (implied) in 4Q. (Signficantly high given just 9 days of lockdown), Adj. EBITDA grew 4.7% to Rs. 3.94bn (vs HSIE: Rs. 4.37bn) as lower GM impact trickled down the P&L. Despite this, APAT grew 43% YoY to Rs. 2.9bn (in-line; on higher other income/lower tax-outgo). Cash position remains the strongest in class (QIP-led) and WC cycle has inched up.

Outlook

We have cut our FY21 EPS by 11% to factor in lower GMs, we largely maintain FY22 estimates and our SELL recommendation with a DCF-based TP of Rs. 1,750/sh, implying ~35x FY22 EV/EBITDA. Stock currently trades at 77/52x FY21/F22 EV/EBITDA.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.