Avenue Supermarts extends gains into fourth straight day, hits record high

Shares of Avenue Supermarts, which runs the DMart chain of stores, were trading higher for fourth straight day, up 2 per cent at Rs 2,837 on the BSE in intra-day trade on Monday and was trading at its all-time high level. In the past one month, it has outperformed the market by gaining 16 per cent, as against a 6-per cent rise in the S&P BSE Sensex.

Meeting of the board of directors of Avenue Supermarts is scheduled to be held on Saturday, January 9, 2021 to consider financial results of the company for the quarter ended December 2020 (Q3FY21).

Since October 17, 2020, post July-September quarter (Q2FY21) results, the stock of Avenue Supermarts has rallied 43 per cent, as against a 19-per cent rise in the S&P BSE Sensex. While announcing Q2FY21 results, the company's management said that month-on-month sales have improved during this quarter – August was better than July and September was better than August. The management also said that the progress of the Covid pandemic and its impact on consumer spending during the festival period will determine the company's financial performance for the next quarter.

Last month, rating agency Crisil said in a rating rationale that strong track record of outpacing its peers in growth, its strong merchandising and compelling value proposition, the benefit of economies of scale will help strengthen Avenue Supermart’s market share in the organised food and grocery retail in India in the medium term.

"DMart's strong execution capability with a stellar execution track record, places it on top of the list among all Food & Grocery (F&G) retail players. Tested business model with consistency in providing highest discounts on a profitable basis helps DMart to outperform competition. The company has ramped up its store expansion and its cluster based expansion aids in trimming costs and supporting margins," analysts at Axis Securities said in a recent report.

The brokerage firm expects the company to deliver healthy growth over FY20-23E with a CAGR of around 23 per cent/24 per cent/25 per cent in Revenue/EBITDA/PAT respectively on account of value retailing (consistency in providing discounts) remains the primary moat, low cost of operation (majority of the stores are company owned), continuous store expansion through a cluster based approach, healthy SSSG and balance sheet with no liquidity constraints, and superior return ratios despite heavy investment in assets.

At 11:13 am, the stock was trading 1 per cent higher at Rs 2,820 on the BSE, as against 0.07 per cent decline in the S&P BSE Sensex. A combined around 190,000 equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.