Avenue Supermarts (DMART) share price: IDBI Capital pegs target price at Rs 3699

DMART share price today: On Avenue Supermarts (DMART), IDBI Capital says that the stock is a '100 bagger', even from current price, over the next 25 years! DMart has potential of compounding EPS at +28% CAGR over FY21-46E. In this report, IDBI Capital shares its learnings from research that it has done to understand the evolution of the 'most popular hard-discounter in the US - The Walmart (physical + ecommerce) - and thereby its implications, similarities, shortcomings as an optionality for DMART. Avenue Supermarts share price closed at Rs 2830, up Rs 15 or 0.5% in yesterday's trade. It has moved down from Rs 2863 to Rs 2830 in the last 1 week.

IDBI Capital sees DMART as a high conviction BUY idea. It said, "We upgrade our valuation multiple to 60x EV/EBITDA" IDBI Capital says that it expect DMART to grow at a higher rate for a longer period of time. IDBI Capital revised target price stands at Rs 3699.

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IDBI Capital says that it expects DMART’s ability to venture into new margin-accretive categories will improve as they move to adding large size stores. However, currently, DMART is treading-waters cautiously while choosing new categories. IDBI Capital observed that DMART has ventured into categories like; footwear, innerwear, electronics, home appliances, school supplies, etc. over the last few years.

IDBI Capital observes that; 75% of Wal-Mart’s e-commerce business comes from non store inventory. Hence, as per evolutionary history, it would be tough to mix online and offline business. Therefore, given the compulsion (as per customer demand) of e-commerce presence, it would be wise to treat both the business differently.