Radhakishan Damani is an ace investor and a business magnate. He is the founder of Avenue Supermarts (DMart) and was reportedly the largest shareholder of HDFC Bank after it went public in the year 1995. Recently a stock in his portfolio received a double upgrade from a brokerage.
Financial Services giant UBS elevated the shares of Avenue Supermarts from a ‘sell’ rating to a ‘buy’ rating and substantially raised its target price to ₹ 4700.00 per share. This translates to an upside of 26.41 per cent as compared to the company’s share price of ₹ 3718.15 apiece on Friday.
UBS upgraded the stock amid a combination of positive cyclical trends, strong structural elements, and the potential for sustained growth in the medium term. Its strong outlook applies to the broader retail industry in India.
Analysts at UBS believe that the company’s business model is resilient and highlights a potential for growth. The brokerage has substantially increased its projections, now anticipating revenue, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation), and EPS (Earnings Per Share) to grow between 3 per cent and 4 per cent.
UBS expects that the company’s expansion efforts, specifically the addition of new stores, will serve as a catalyst for growth. Moreover, several cyclical parameters are currently trending positively for the company. It indicates that DMart has ample room to coexist alongside industry giant Reliance Retail, positioning itself as a prominent national player.
With a market capitalization of ₹ 2,41,685 crores, Avenue Supermarts is a large-cap company. It has an ideal return on equity of 18.70 per cent and an ideal debt-to-equity ratio of 0.04. Its shares were trading at a price-to-earnings ratio (P/E) of 100.95, which is almost at par with the industry P/E of 102.63.
DMart is one of the largest and most successful hypermarket chains in India. It has a deep understanding of its customers’ requirements and its stores reflect it with simple interiors and products that customers require more often. For example, we hardly find furniture, electronics, or jewellery in its stores, as preference is given to fast-moving consumer goods.
The company’s revenue grew at a CAGR of 16.45 percent from ₹ 20,004 crores in the financial year ended 2018 to ₹ 42,839 crores in the financial year ended 2023. Its net profit grew at a CAGR of 21.40 per cent from ₹ 902 crores to ₹ 2378 crores over a period of five years.
Written by Simran Bafna
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