CLSA initiates coverage on this retail company, sees 26% upside; shares jump

Avenue Supermarts shares jumped on Thursday after foreign brokerage CLSA initiated coverage on the company with a 'buy' rating and a target price of Rs 5,107 per share, implying an upside of 26 per cent. At 9:23 am, the stock of Avenue Supermarts, which owns and operates DMart stores, was up by Rs 170.5, or 4.2 per cent, at Rs 4,225, after rising to as high as Rs 4,234.9 apiece in intraday trade.

While highlighting that DMart is a discount retailer offering the lowest consumer prices given the lowest operating cost, CLSA says that out of the company's total $500 billion addressable market, only five per cent is organised. 

Also, a rise in product-label products should drive the next leg of share gains for the company, according to the brokerage.

CLSA sees the number of DMart stores increasing more than three times by FY34.

Currently, the stock is trading below its historical valuations, it added.

In a significant move, the company has appointed former SEBI chairman Chandrashekhar B Bhave as chairman of its board. He will take over on April 1, according to an exchange filing by DMart.

How DMart shares have fared in past

The DMart stock has risen nearly 21 per cent in the last year, underperforming a rally of 29.8 per cent in the headline Nifty50 index.

Avenue Supermarts shares are currently trading above their 30-, 50-, 100-, and 200-day simple moving averages, signifying an overall long-term uptrend, according to equity research portal Trendlyne.

Trading at a trailing-12-month (TTM) price-to-earnings multiple of 108.5x, the stock has an average rating of 'hold' by 25 analysts, with nine of them signalling a 'strong buy', Trendlyne data shows.

The consensus recommendation from 25 analysts on the stock is a 'hold' with 9 of them signalling a 'strong buy', Trendlyne data shows.

D-Mart's parent entity Avenue Supermarts is a supermarket chain offering an array of home and personal products.

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