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PL Capital Report
The brokerage firm PL Capital has maintained a 'Hold' rating on Avenue Supermarts Ltd. with a negative bias given rich valuations of 73.1 times on FY28E earnings per share and limited growth visibility in near term.
According to the brokerage, DMart numbers were largely in line with estimates, with sales/store and sales/ft declining by 3.7% and 3.0%, respectively.
Bill cuts increased by 13.4% YoY, led by the addition of 58 stores in Q4; however, bills/store/day declined by 5.1%, reflecting the impact of elevated store openings in Q4 on store throughput.
Non-metro stores grew ahead of metro stores, while older stores in metro areas witnessed flattish growth.
PL Capital continues to remain cautious on the stock, given-
- increasing competitive intensity from quick commerce players, which is likely to continue denting metro store performance,
- sustained deterioration in store metrics, and
- imited scope for margin expansion amidst growth concern while overheads remain at elevated levels.
Additionally the brokerage believes rising competition from quick commerce is likely to limit growth across Modern trade and DMart Ready. DMart Ready has exited 14 cities in last 15 months and now is confined to 11 cities with focus on larger towns only. DMart plans to raise Rs 1,000 crore NCD, we estimate that Q1 FY27 debt level has increased from Rs 1,100 crore to ~2,500 crore YoY.
The brokerage builds in Ebitda margins of 7.4/7.0% for FY27/FY28 versus 7.5% in FY26. and expects the store addition pace to remain elevated with ~75 additions each in FY27/FY28.
PL Capital estimate an EPS CAGR of 10.7% over FY26–28 and arrive at a DCF-based unchanged target price of Rs 4,103.
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