Sell Avenue Supermarts; target of Rs 2668: Dolat Capital Market
Dolat Capital Market recommended sell rating on Avenue Supermarts with a target price of Rs 2668 in its research report dated January 09, 2021.
January 14, 2021 / 09:02 PM IST
The four stocks they exited are Macpower CNC Machines, NDR Auto Components, Novartis India and RSWM, according to Dolat Capital.
Dolat Capital Market's research report on Avenue Supermarts
Dmart reported a healthy recovery with revenue/EBITDA/APAT growth of 10.1/16.6/19.3% YoY. 11/52bps gross/EBITDA margin expansion YoY is enticing despite estimated inferior mix. Meagre one store additions (lowest in 14 quarters) was key negative. Dmart’s increased focus on online (Dmart ready) is positive. Inevitable strategic shift by Dmart towards online is positive in our view given the pace of e-commerce growth. That said, in the near term online shift may impact store/area expansion and thus the growth of B&M stores. Simultaneously, online may take longer to deliver growth and may even pull-down earnings. In this back-drop, Dmart recent run-up of 44/63% in 3M/52-week low and rich-valuation at 93/74x FY22/23E standalone EPS leaves limited room to err. Dmart has historically traded at 87x 1-yr forward earnings.
Sell with revised TP of Rs 2,668 @ 70x (vs. 60x earlier) Dec-22E EPS. Increase in target multiple is to factor strategic shift, business recovery/healthy margin and broader market re-rating.
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