Hold Avenue Supermarts, target Rs 1,338: Prabhudas Lilladher

Prabhudas Lilladher has given a hold recommendation on Avenue Supermarts (D’Mart) with a target price of Rs 1,338.

Shares of Avenue Supermarts traded at Rs 1,434 around 12:30 pm on 15 July, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.

D’Mart has sustained strong sales momentum led by Everyday low price model, strong value proposition and clusters based strategy.


D’Mart has added 8 stores in Q120, however large part of store openings are a spillover of FY19.

"Though Q120 gross margins were higher, we believe it will normalise in the coming quarters," said the brokerage.

It continues to maintain its growth strategy of gradual acceleration in store openings (added 21 stores in FY17, 24 in FY18 and 21 in FY19) and strong throughput in stores.

The brokerage believes benefits of higher store openings in Q1 boosted sales while 40bps margin expansion was led by operating leverage.

"We estimate 37.4 per cent PAT CAGR over FY19-21. However, valuations at 49.8 times FY21 EPS factor in the expected growth," said the brokerage.

Absolute returns might be back ended due to estimated fresh supply of nearly Rs 6,200 crore in QIP and OFS by March 2020, the brokerage added.