Shares of Avenue supermarkets are trading in green in Monday's trade after rallying over 17% in the last one week. At 02:00 pm (IST), the scrip traded at ₹3,994.40/share around 1.33 per cent above its previous close of ₹3,941.70.
At its current level, the stock is trading at a discount of 32.66% from its 52-week high of ₹5,900, which it previously touched on October 18, 2021. However, the stock gave a 3-year return of 187.09% as compared to the Nifty 100, which gave a return of 41.66%. Over the last five years, the market price of the stock has zoomed by 340.19 per cent.
Avenue Supermarts (ASL) operates a supermarket chain under the "DMart" brand with a core focus on value retailing.
The company reported a 490.30 per cent YoY increase in standalone net profit at ₹680 crore in the first quarter of the fiscal year 2022-23 (Q1FY23), compared to ₹115 crore in the same quarter last year.
Total revenue increased by nearly 95% to ₹9,807 crore in the June-end quarter of FY23, compared to ₹5,032 crore in the same period last year. The company added 10 new DMart outlets, taking the total store count to 294 with a total business area now crossing 12 million sq ft.
Further, the company’s EBITDA grew almost four-fold to ₹1008 crore in Q1FY23 as against ₹221 crore in the corresponding quarter of last year. Similarly, DMart's EBITDA margin increased by 10.3 per cent year on year, from 4.4 per cent.
ICICI Securities is bullish on the stock post Q1 numbers. The brokerage firm has a 12-month target price of ₹4,700/share on ASL, which hints toward an upside of 20 per cent from its latest close.
Avenue Supermarkets has been a consistent compounder, with the stock price increasing at a 35% CAGR in the last five years. It continues to remain India’s most profitable low-cost retailer, a strong play on India’s retail growth story and a key beneficiary of the unorganised to organised segment shift, "said ICICI Securities.
The brokerage firm anticipates the D-Mart store addition trajectory will accelerate and bake in 80 incremental store additions (addition of 4.8 million sq ft) in FY23-24E.
Over the last three years, the company has expanded its square feet addition by an impressive three-year CAGR of 24%, with the average size of new stores being bigger (55000+ vs. average 35000 sq ft). The new larger stores have never had an opportunity to function in normal circumstances over the last two years. Hence, the revenue throughput per sq ft has remained below pre-Covid levels in Q1FY20: ₹9200, Q1FY22: ₹3405, and Q1FY23: ₹8300, the brokerage firm said.
ICICI securities expect the company’s RoIC (Return on Invested Capital) to improve in the current financial year on the back of dual triggers of enhanced margins and better store throughput.
Meanwhile, the stock has a price-to-earnings ratio of 172.48x compared to the peer average of 158.34x and it has a price-to-book value of 18.67x. Earnings per share have grown by 16% each year on average over the last three years, while the company's share price has increased by 43% per year, putting it well ahead of earnings growth.
An average of 27 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.