Avenue Supermarts - Pick-Up In Store Expansion Key: HDFC Securities

HDFC Securities Institutional Equities

Our inferences from Avenue Supermarts Ltd.’s FY24 annual analyst meet were threefold –

1. pace of store expansion will be a key monitorable; the bottleneck being the availability of unit economics-friendly real estate. Currently primed to add 40- 45 stores annually. This could keep the ask from same-store sales growth for growth high (our estimate: 18% CAGR over FY24-27) in a disinflationary environment.

2. Gross margin profile likely to be stable (14-15%) while focus will be to improve revenue/stock keeping unit; ergo sourcing margins which could then be passed on to end consumer to earn higher sales density.

3. DMart Ready remains WIP; the focus is to improve the format’s gross margins by improving the product mix.

We maintain our FY25/26 EPS estimates and Reduce rating as risk-reward seems unfavorable at 80 times June-26 P/E. We have a DCF-based target price of Rs 3,750/share, implying 60 times June-26 P/E.

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