JPMorgan and Nuvama raised their target prices for Avenue Supermarts, the stock of which they have upgraded because it has opened more stores and stocked a wider range of goods.
D-Mart owner Avenue Supermarts‘ Q4FY24 performance was strong across key metrics of profit, revenue and profitability. Positive results have led to brokerages getting optimistic about the future trajectory of Avenue Supermarts. The management comment of increasing share of GM&A into its mix is seen as a significant positive by Nuvama Institutional Equities.
JPMorgan sees this development as a turnaround with particular emphasis on improvement in apparel segment. Foreign brokerage expressed confidence in the stock seeing a promising risk-reward scenario and appropriately placed business for future acceleration. Consequently, it upgraded to ‘overweight’ with price target at Rs 5,400 from Rs 3,700 earlier.
This revision is based on their belief that D-Mart could achieve high teens revenue growth over medium term driven partly by ability to offer products at most competitive prices thus differentiating itself from peers.
Besides; it expects margin expansion for ASL on back of scale benefits premiumisation better product mix cost focus among others; accordingly FY25-26 EPS estimates were raised ~3-6%.
At same time addition of 24 new stores during Q4FY24 taking total count upto 365 has also helped enhance confidence in company’s growth prospects according to Nuvama which foresees another 85 stores by FY26 alongwith increase share of GM&A into product mix expected to positively impact margins.
However Motilal Oswal Financial Services believes recovery in revenue per square foot (sft) being higher than store sft indication towards improvement in share large format stores for ASL hence bullishness but this view was not shared by either JP Morgan or Goldman Sachs who reiterated their own respective stances on stock even though they differed otherwise about number locations etc.
Goldmans predicting similar store adds like previous year while JP expects more broadbased state level expansion for next two years till fiscal end March twenty six onward only targeting specific states where already present with larger formats being added there instead.
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Goldman Sachs maintains sell rating on Avenue Supermarts with target price of Rs 3900 as it believes that the store additions will be similar to last year. The brokerage has a contrarian view and expects JPMorgan’s estimate for more broadbased expansion in states over next two years till fiscal end March twenty six onward only targeting specific states where already present with larger formats being added there instead.
However, Q4 profit growth finally aligned to revenue growth for the first time in many quarters which prompted GoldmanSachs upbeat mood about future prospects of ASL stock but at same time noting that they expect this trend will not sustain beyond one quarter hence giving such cautious outlooks overall so far.
Avenue Supermarts posted strong Q4 earnings with consolidated net profit growing 22.5% YoY to Rs 563 crore and revenue rising 20% at Rs 12,726.6 crore driven by area addition & productivity growth further aided by improved mix of general merchandise & apparel expanded gross margins 30 bps to 13.7%.
As of May 6th, shares of Avenue Supermarts were trading higher or lower on the NSE at different times throughout the day.
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