Prefer DMart Over Nestle India, Says ICICI Securities

ICICI Securities Report

We expect Avenue Supermarts Ltd. to outperform Nestle India Ltd. in the medium term, driven by-

1. valuation turning palatable; premium over Nestle has reduced from ~50% over the last two years to ~8% now,

2. known problems with limited downside business risk with-respect-to underperformance in apparel segment; DMart can choose not to sell what doesn’t sell well (benefit of being a platform company),

3. revenue outperformance, while it appears to have been marked down to 18-21% compound annual growth rate (versus ~30% during pre-Covid quarters), it is still much higher (consistently; 6-10% same-sales store growth) compared to most other fast moving consumer goods/retail companies,

4. healthy net profit margin despite subdued performance in the margin-accretive apparel, general merchandise segments.

Upgrade DMart to Add (from Hold) and maintain Hold on Nestle.

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