Avenue Supermarts - Company Update - August 2020 - ICICI Securities

We attended the annual conference call on Avenue Supermarts (D-Mart) to get an insight into the outlook and challenges lying ahead owing to the Covid-19 pandemic. Majority of the questions (as anticipated) were pertaining to future plans regarding its e-commerce play ('DMart Ready') and views on intensified competition from new entrants with deep pockets. The management reiterated its stance of not aggressively foraying into e-commerce play and rather focusing on further consolidating its position to be an eminent player in the brick & mortar format. Over the years, D-Mart, through its proven business model, has been able to maintain consistent profitability and remains an exceptional performer in its peer group. Currently, ~95% of stores are operational, with stores seeing 80% of pre-Covid sales.

Valuation & Outlook

The near term outlook remains challenging given the uncertain scenario and various limitations on store operations due to strict lockdowns enforced by local authorities (that would impact footfalls). The company continues to have a healthy liquidity position (~Rs. 3000 crore) with a strong balance sheet. D-Mart has proven to be a resilient business model generating superior RoIC of 23% and healthy fixed asset turnover ratio of 4.1x. We build in revenue and earnings CAGR of 21% and 29%, respectively, in FY20-22E. We reiterate our HOLD rating with a target price of Rs. 2360 (45x FY22E EV/EBITDA).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_AvenueSupermarts_CoUpdate_Aug20.pdf

Shares of Avenue Supermarts Ltd was last trading in BSE at Rs.2160.4 as compared to the previous close of Rs. 2163.65. The total number of shares traded during the day was 22423 in over 2571 trades.

The stock hit an intraday high of Rs. 2189 and intraday low of 2151. The net turnover during the day was Rs. 48673474.

Source : Equity Bulls

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