Avenue Supermarts share price: IDBI Capital revised target price to Rs 3699 - 23% potential upside
The best recourse to conviction is best-in-class-research. We have attempted one on Avenue Supermarts (DMART). IDBI Capital believes, DMART stock is a 100 bagger, even from current price, over the next 25years. This company has potential of compounding EPS at +28% CAGR over FY21-46E.
The best recourse to conviction is best-in-class-research. We have attempted one on Avenue Supermarts (DMART). IDBI Capital believes, DMART stock is a 100 bagger, even from current price, over the next 25years. This company has potential of compounding EPS at +28% CAGR over FY21-46E. In this report; IDBI Capital shares, learning from research that we have done to understand evolution of the most popular hard-discounter in US - The Walmart (physical + ecommerce) and thereby implications; similarities, shortcomings and optionality for DMART. Avenue Supermarts share price closed at Rs 3034.6 in yesterday's session, up Rs 20 or 0.7%.
This is an original work (not what management said), ideas have been inspired by books that we have read so-far (>60 after lockdown; on politics, religion, brands, retail etc.) and last 49 years annual reports/transcripts that we have browsed on Wal-Mart. IDBI Capital see DMART as a high conviction BUY idea. IDBI Capital upgrade our valuation multiple to 60x EV/EBITDA as IDBI Capital expect DMART to grow at higher rate for longer period of time. IDBI Capital revised target price stands at Rs 3699.
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IDBI Capital 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 observe that DMART have ventured into categories like; footwear, innerwear, electronics, home appliances, school supplies, etc. over last few years.
IDBI Capital observes that; 75% of Wal-Mart’s e-commerce business comes from nonstore 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. Hence, DMART using DMART Ready model is a right-full approach towards solving for convenience demand of customers.
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