Buy This Multibagger Diversified Retail Stock For 15% Gains, Given More Than 300% Returns In 5 Years

IDBI Capital, a renowned brokerage firm published a report on Avenue Supermarts, the owner & operator of D-Mart, a retail store chain. The brokerage recommends buying the stock of the company for a target price of Rs 4,571/share. According to the brokerage, Avenue Supermarts' 1QFY23 results were above expected.

Retail expansion has been faster due to an increase in the size of new stores since last 3+ years to c. 50k sqft. During FY20-YTDFY23 D-MART added 120 stores out of total 294 stores. These modern stores (41% of total) couldn't operate at full capacity since last 2 years due to COVID but have done extremely well during 1QFY23.

High inflation impacted recovery in discretionary business which is yet to reach pre-pandemic levels. In old D-MART stores; positive volume growth in the discretionary segment is encouraging. The net profit margin at 6.9% is the highest ever. Out of total QIP money raised; Rs 12.35 bn stands unutilized.

Stock Overview: CMP, Target Price, Returns, Potential Gains, 52-Week Low & High

The Current Market Price (CMP) of Avenue Supermarts Ltd is Rs 3,986.85 per share. The stock's 52-week low is Rs 3,186 per share, recorded on 16th May 2022 and whereas, the 52-week high is Rs 5,900 per share, recorded on 18 October 2021 on NSE. The stock is trading above Rs 800.85 from its 52-week low on NSE.

The stock is likely to gain around 15% in 12 months if the stock is brought at the CMP i.e., Rs 3,986.85, considering the estimated target price of Rs 4,571 per share.

The stock in terms of return on investment has given promising returns on long-term investments and positive returns on short-term investments. In the last 1 week, it gained 14.06% and in the last 1 month, it gained 6.16%, respectively. Over the last 1 year, it has given 18.04% positive returns. It has given multibagger returns of 190.38% in 3 years, and 337.97% in 5 years, respectively.

Stock Details
CMP	Rs 3,986.85
Target Price	Rs 4571
Potential Gains	15.00%
1-Year Return	18.04%
3-Years Return	190.38%
5-Years Return	337.97%

Strong revenue growth coupled with steady store additions

Standalone revenue grew 95%YoY (19% 3 year CAGR) to Rs98bn. Revenue from subsidiary grew 53%YoY. General merchandise & apparel performed better sequentially, but impacted due to inflationary pressures. During 1QFY23 DMART added 10 stores (Total stores 294).

Healthy net profit margin driven by better revenue mix

Gross Margin stood at 15.8% (+345bp YoY) while EBITDA margin at 10.3% (+588bp YoY). NPM stood at healthy 6.9% (+464bps YoY). PAT grew 27% on 3 yr CAGR to Rs6.8 bn.

High conviction buy, Target Price Rs 4,571/share

The brokerage said, "We have marginally adjusted our EPS estimates upwards by 3-4% during FY23-24E as we expect better revenue mix from the modern large size stores. Our revised Target Price stands at Rs 4,571. We maintain DMART as our high conviction BUY idea in the retail sector."

Aveneue Supermarts Ltd

The supermarket chain of DMart stores is owned and operated by Avenue Supermarts Ltd. (ASL). The company has its headquarters in Mumbai. DMart is a one-stop supermarket chain that aims to offer customers a wide range of basic home and personal products under one roof. Each DMart store stocks home utility products - including food, toiletries, beauty products, garments, kitchenware, bed and bath linen, home appliances and more - available at competitive prices that our customers appreciate. Since the launch of its first store in Powai in 2002, DMart today has a well-established presence in 294 locations across Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu, Punjab and Rajasthan. With our mission to be the lowest-priced retailer in the regions we operate, our business continues to grow with new locations planned in more cities.

 

Disclaimer

The stock has been picked from the brokerage report of IDBI Capital. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.