Avenue Supermarts Ltd’s Dmart crosses ₹2 trillion in market valuation

The owner of D-Mart chain of retail stores, Avenue Supermarts Ltd, crossed 2 trillion in market valuation after the stock surged nearly 20% in the last three weeks on Wednesday.

The stock has gained in 11 out of 13 sessions tracking gains in the broader market. The scrip was trading at a record high of 3,094 on the BSE, up 3% with a market cap of 2.01 trillion. India’s benchmark equity index Sensex was up 100 points. Since December 17, Dmart climbed 20% adding investors wealth by nearly 35,000 crore. Domestic equities were up in 21 out of 23 sessions having gained nearly 8.52%.

Investors have rushed to buy the stock amid hopes of a return to normalcy after India authorised emergency use of COVID-19 vaccines of Serum Institute and Bharat Biotech.

Even though the firm has a risk of higher competition from JioMart, Flipkart, Amazon and many other e-commerce platforms, brokerage firm Axis Securities believes that the company is well placed in the domestic retail industry given its strong execution capabilities, “disciplined Every Day Low Prices and Every Day Low Costs (EDLP/EDLC) strategy, lower cost of operation and streamlined distribution network aiding DMART to penetrate into newer markets.”

Axis Securities has initiated coverage on the stock with a buy recommendation and a target price of 3100 a share.

The company has 220 stores and 225 Dmart Ready stores as of second quarter of the fiscal year 2021. The analysts expect that the company will add 100 stores till FY23E with 80% of the stores in the existing clusters and 20% would be new clusters.

The stock currently trades at 41 times multiple EV/EBITDA which analysts believe is attractive given the strong revenue growth and large headroom for expansion going ahead.

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