Neutral Avenue Supermarts; target of Rs 2100 : Motilal Oswal

Motilal Oswal 's research report on Avenue Supermarts

DMart has witnessed sequential revenue recovery (up 37% QoQ) with consistent MoM growth in 2QFY21. However, numbers are still weak YoY (down 11%) with -12.5% SSSG. Gross Margin has improved, but is still down 90bp YoY due to lower mix of the margin-accretive discretionary business. -DMart added six stores in 2QFY21 despite the economic headwinds. We have marginally tweaked our numbers for FY21E/FY22E, factoring in 2%/41% revenue growth and EBITDA growth of -13%/59%, which reflects gradual recovery from 3QFY21.

Outlook

Thus, we value DMart at ~20% discount to its three-year average EV/EBITDA multiple of 54x, implying 6% upside. We retain our Neutral recommendation.

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