D-Mart hits new high; shares surge 18% in weak market on heavy volumes

The stock hit a new high of Rs 1,124 on NSE in intra-day trade, rallied 75% since listing on March 21 and 276% against IPO price of Rs 299 per share

Shares of Avenue Supermarts, which owns and operates D-Mart retail chain, on Tuesday, hit a new high of Rs 1,218, up 18% on the National Stock Exchange (NSE) in intra-day trade in an otherwise weak market on heavy volumes.

At 1:38 am, the stock was trading 17% higher at Rs 1,209, as against rangebound movement on the Nifty50 index. The trading volumes on the counter nearly doubled with a combined 1.5 million shares changed hands on the NSE and BSE so far.

According to media reports, the global financial services firm Goldman Sachs initiated coverage of the stock with ‘Buy’ rating and set a target price of Rs 1,586.

D-Mart which is promoted by veteran ace investor Radhakishan Damani rose 276% against its initial public offer (IPO) price of Rs 299 per share. The stock had ended at Rs 642 on its stock market debut on 21 March, 2017, and has rallied 75% since then. On comparison, the benchmark Nifty50 index gained 7% during the same period.

D-Mart is an emerging national supermarket chain that offers customers a range of home and personal products under one roof. The Company offers a wide range of products with a focus on foods, non-foods (FMCG) and general merchandise & apparel product categories.

“Reiterating its mission of being the lowest priced retailer, D-Mart’s larger focus of expansion would be in states where it is already present. SSSG (Same-Store Sales Growth) trends have been healthy further supported by accelerating shift towards modern trade. Tight control over costs was noticed in FY17 driving margin expansion,” JP Morgan said in key takeaways from FY17 annual report of D-Mart.

"The return ratios moderated in FY17 on account of equity raising. We expect them to improve in the forthcoming period as the debt levels reduce and operating margin expands. The better than expected SSSG trends, higher inflation aiding comps, margin uptick from increased cost optimization, faster than estimated store additions and positive contribution from E-commerce are the key upside risks" the report says.