Retail Stock Gets Sell Recommendation As Underlying Profitability Disappoints: HDFC Securities

HDFC Securities has assigned sell call to large cap Retail Sector stock, Avenue Supermarts with a target price of Rs 3000. The current market price of the stock is Rs 3688.05 apiece with an intraday gain of 0.26%. According to analyst, "Low discretionary purchases keep underlying profitability/unit economics subdued." Check details below:

1. Avenue Supermarts Stock Performance

The last trading price of the stock is Rs 3688.05 apiece with 52-week high at Rs 4606.00 apiece and 52-week low at Rs 3185.10 apiece, respectively. The company has a market capitalisation of Rs 2,38,902.54 crore.

2. Avenue Supermarts Return

The stock declined 8% in last 1-month, 11% in last 3-months, 16% in last 1-year, and surged 85% in last 3-years. In last 5-years, the stock has soared a little over 216%.

3. Valuation

According to HDFC Securities, "DMART's unit economics remains sub-optimal vis-à-vis the prepandemic days (partly attributable to the step-up in store additions/size). While we factor in recovery over FY22-24, this assumption stands at risk, given the heightened competitive intensity from deep-pocketed retailers. Hence, we maintain SELL on DMART, with a DCF-based TP of INR 3,000/sh, implying 34x FY24 EV/EBITDA for the standalone business + 4x FY24 sales for DMART Ready."

4. About Avenue Supermarts

The supermarket chain of DMart stores is owned and operated by Avenue Supermarts Ltd. 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 etc, according to its official website.

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. 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.