Avenue Supermarts share price declined over 2% on Monday after Emkay Global initiated its coverage on the stock with a bearish view. Avenue Supermarts shares dropped as much as 2.69% to ₹4,281.65 apiece on the BSE.
The fall in Avenue Supermarts share price also comes amid a broader Indian stock market crash. The benchmark indices, Sensex and Nifty 50 traded over 1.5% lower each on weak global market cues.
after brokerage firm Emkay Global Financial Services initiated coverage on the stock with a ‘Sell’ rating. The brokerage firm has Avenue Supermarts share price target of ₹3,700 apiece, implying a downside potential of nearly 16% from Friday’s closing price.
Avenue Supermarts, the parent company of D-Mart retail chain operator, has a strong brand value, but it has been slow to expand the Total Addressable Market (TAM).
“DMart has a low 1.5% market share and caters to only ~50% of the Indian retail TAM versus Walmart’s 7-8% share and ~100% US retail market TAM. The Indian consumer is embracing convenience, with quick commerce (QC) shares already at 1.5x of modern trade in key metros and QC now deepening presence in the next 50-100 cities,” said Devanshu Bansal, Research Analyst at Emkay Global Financial Services Ltd.
The brokerage firm’s pricing analysis of the monthly basket indicates that the QC players are increasingly focusing on value and product assortment, following their success in delivering unmatched convenience. Given their strong balance sheets, Emkay Global does not anticipate any meaningful recovery in same-store growth (SSG) for DMart, aside from seasonal fluctuations and potential price hikes by brands.
Additionally, Bansal highlighted that DMart’s capex per store has increased by approximately 60%, resulting in a ~600 basis point decline in RoIC to around 13% over FY23–26E.
While the ace investor Radhakishan Damani-led company has executed effectively on store expansion and the rollout of private labels, its valuation at ~70x one-year forward P/E already factors in sustained improvement in these metrics, underpinning the brokerage’s cautious stance on the stock, he added.
The brokerage’s estimates assume a 19% EBITDA CAGR over FY25–35E, supported by 6.0–7.5% SSG growth, around 13% annual store expansion, and an estimated ~200 basis point improvement in margins.
DMart Share Price Performance
DMart share price has gained over 13% in one month and has rallied 17% on a year-to-date (YTD) basis. The stock has risen 5.5% in one year, but has fallen 9% in two years. DMart shares have surged 54% over the past five years.
At 10:20 AM, DMart share price were trading 1.15% lower at ₹4,349.40 apiece on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
