Sell Avenue Supermarts; target of Rs 1750: HDFC Securities

HDFC Securities is bearish on Avenue Supermarts has recommended sell rating on the stock with a target price of Rs 1750 in its research report dated May 24, 2020.

May 26, 2020 / 05:55 PM IST
  • bselive
  • nselive
Todays L/H

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.


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 are their own, and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

Broker Research
first published: May 26, 2020 05:55 pm

stay updated

Get Daily News on your Browser