Motilal Oswal is bearish on Avenue Supermarts has recommended sell rating on the stock with a target price of Rs 1900 in its research report dated May 25, 2020.
Motilal Oswal 's research report on Avenue Supermarts
10.9% SSSG and a strong 18 store additions drove 24% YoY revenue growth (in-line) in FY20. However, the company reported a big 22% miss on EBITDA with 4% YoY growth. - We have cut our EBITDA estimate by 16.8% for FY21E due to 50% of stores being closed over Apr-May'20, lower gross margins from increased non-discretionary revenue, and higher opex. However, we maintained our FY22E EBITDA estimates given the sharp recovery expectation as it pertains to non-discretionary.
We cut our FY21 EBITDA by 17%, but retain our estimates for FY22. We raise our target multiple on EV/EBITDA to 40x from 35x and arrive at a TP of 1,900 from the current price, which still implies a 21% downside; we maintain our Sell rating.
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