Sunday, May 20, 2018

Buy Avenue Supermarts; target of Rs 1675: JM Financial


JM Financial's research report on Avenue Supermarts


DMart��s 4QFY18 profitability is a tad below the kind of trajectory that one has come to expect from the company, and that was in part due to the accelerated store-additions that happened during the quarter - 14 new stores were added vs past 6M��s run-rate of 4-5 per quarter. This likely caused a higher than expected rise in 4Q��s SG&A and some adverse impact on mix. Revenue growth is on expected lines �� 22.5% on reported basis which, as per our workings, translates to an intrinsic growth of 27-28%. Reported LTL growth for FY18 is a modest 14.2% which again, in our view, has the impact of GST-related changes ex which LTL for the fiscal would have been c.18%. LT story is intact; 14 new stores in 4Q take FY18��s total to 24 - reflecting a slightly higher pace vs that achieved in the last 2 years �� this should allay concerns on DMart��s ability to find new locations for store rollouts, in our view.


Outlook


We remain bullish; any weakness in stock price should be used as an opportunity to add positions in what we believe to be a best-in-class cashflow-backed earning-compounder.


For all recommendations report, click here


Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More