DMART Vs JioMart Vs Big Basket: Why Radhakishan Damani-Backed Stock Is In Sweet Spot, 16% Upside Seen

Ace investor Radhakishan Damani-founded Avenue Supermarts is likely to sustain a competitive advantage over its peers such as JioMart and Big Basket in consumer categories. This is because the company's D'Mart Ready has continued to remain most competitive in online retail, with a price gap higher by 40% against its rival Big Basket. Brokerage Prabhudas Lilladher is the latest to recommend buying DMART shares which are currently near the Rs 4,100 mark.

Brokerage Prabhudas Lilladher analyzed the price trend of 125 products across D'Mart Ready, Jiomart and Big Basket in key consumer categories of Loose grocery items, dairy, packaged food, beverages, personal care and home care.

The brokerage observed that out of 125 products that we compared, the price gap (Nov'23 vs Aug'23) between D'Mart Ready & Big Basket increased for 40% of products, while for Jiomart the trend was mixed with 36%/24% of products seeing gap increase/decrease. D'Mart Ready continues to remain most competitive in online retail led by 1) a sustained price gap with BB & Jiomart 2) rising consumer activations and advertising and 3) an increase in delivery charges/higher cart value for free delivery by other channels.

Further, PL noted that Ecom in Grocery and Food is witnessing accelerated growth due to the rising acceptance of quick commerce. However, quick commerce is gaining ground at the expense of Mom and Pop stores while formats like Hypermarts and online platforms (D'Mart Ready, JIO, Big Basket, Amazon) continue to cater to monthly/bi-weekly grocery requirements.

That being said, PL's note said, "We expect D'Mart Ready to sustain strong growth due to sourcing and scale advantages. We expect D'Mart Ready to report sales of Rs48bn with an EBITDA loss of R424mn by FY26 with a full turnaround by FY28. Retain 'Buy' on D'Mart with DCF-based TP of Rs4724."

From the current price level, DMART's share price is likely to rise by over 16% in the near term if taking into consideration PL's target price. On December 8th, DMART shares ended at Rs 4061.75 apiece, down by 1.3% on BSE. Nevertheless, DMART is the largest retail company in terms of market share with an m-cap of over Rs 2.64 lakh crore. In a six-months span, DMART shares have rallied by nearly 12%.

DMART is also expected to make extensive store additions in the remaining quarters of FY24. Brokerage Kotak Institutional Equities said, "Dmart's store addition to date in FY2024 stands at 15 compared with overall 45 new stores, modelled by us for FY2024. Store addition trends of the previous 7 years show that 4Q of the respective year contributed to as much as 42-67% of the new store addition of the year."

Kotak's note added, "With ~4 months still to go in FY2024, Dmart can pick up the pace, though it will need to push hard on execution to add ~7.5 stores a month in December 2023-March 2024. Dmart Ready's network is expanding and we reckon a larger number of Minimax
stores would be added to support this expansion."

Mumbai-based Avenue Supermarts owns and operates D-Mart stores. D-Mart is a national supermarket chain that offers customers a range of home and personal products under one roof. The Company offers a wide range of products with a focus on Foods, Non-Foods (FMCG) and General Merchandise and apparel product categories.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.