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Motilal Oswal Report
Motilal Oswal has reiterated its Buy rating on Avenue Supermarts Ltd. with a revised target price of Rs 5,000 from Rs 4,600, implying a potential upside of up to 15%, based on a valuation of 45x FY28 EV/Ebitda, which implies around 80x FY28 P/E.
Why the upgrade
Acceleration in store additions continues to remain the key growth trigger for DMart, in brokerage's view.
Motilal Oswal raises its FY27-28 store additions to 85-90 stores versus 70-80 openings earlier, given significant white spaces in densely populated states such as Uttar Pradesh, Bihar, and West Bengal.
While the competitive intensity from quick commerce could remain elevated in the near-to medium term, Motilal Oswal believes DMart's value-focused model and superior store economics would ensure its competitiveness and customer relevance over the long run, especially in tier 2+ towns, where the potential for growth remains significant.
The brokerage has raised its FY27/28E Ebitda by 5-7% and PAT by ~2-4%, driven by higher store additions.
Motilal Oswal builds in a compound annual growth rate of 19%/20%/16% in DMart's consolidated revenue/Ebitda/PAT over FY26-28, driven by ~16% CAGR in retail store/area and a mid-to-high-single-digit like-for-like growth.
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ALSO READ: DMart Gets An Upgrade From Morgan Stanley With 14% Upside
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