Shareholders of hypermarket chain operator – Avenue Supermarket have much to celebrate. The share price of this stock is likely to cross the Rs. 5,000 mark by March 2022, said experts.
Moreover, a robust business model combined with a fresh demand for offline shopping will likely cause the stock price to rise further. This proves that this stock was one multi-bagger you may have missed. Here are some highlights and details of the story.
- On 21 September, the shares of DMart were quoted at Rs. 4,367 per share, which is a 1361% rise (14.6 times) since the IPO price of Rs. 299.
- Avenue Supermarts has outperformed Nifty50 and Nifty Midcap100.
- Moreover, experts foresee the stock reaching a market capitalisation of Rs. 3 lakh crore though it is presently valued at Rs. 2.82 lakh crores.
What is the reason behind Avenue Supermarket’s (DMart) superior performance? Experts point to the business model as the core rallying factor.
About Avenue Supermarkets
Avenue Supermarkets, a hypermarket retail chain in India known as DMart, was established in May 2002. Presently, it is spread across 17 cities and 11 states. Moreover, it is among the top 40 largest companies on the Bombay Stock Exchange.
Radhakishan Damani owns this organisation and has a 74.99% equity stake in it as of June 2021. The hypermarket sells everyday products and has a good operating performance.
In the quarter ended June, the company reported a 31.3% year-on-year increase in revenue. In addition, it has a long-term net sales CAGR of 9.44%. Moreover, experts say that more impressive numbers are likely to come once the Covid-19 situation normalises.
Business Model as the Core Factor Behind this Rally
Experts attribute the rally of share price to the compact business model that pegs the chain. As of 2021, this retail chain is debt-free and cash-rich, a rare scenario in a pandemic hit the country.
Avenue Supermarket’s business model is at an everyday-low cost/everyday low price business model. EDLC-EDLP means DMart gets its goods at a competitive price, and using operation and distribution efficiencies, sells at competitive prices to consumers.
Other advantages of this firm that contributed heavily to the rally are as follows:
- One of a kind distribution channel that goes directly from factory/farm to DMart to customer, thereby eliminating any middlemen.
- Stores are located in strategic places providing both capital appreciation and return on capital invested in real estate.
- Elimination of intermediaries increased its margins.
- Aggressive expansion into new territories.
This good news is further buoyed by the fact that the retail giant was not affected badly by Covid-19’s second wave. The supply chain also has not been affected, and construction on other sites has managed to continue.
Presently, analysts expect the stock to hit Rs. 5,000 in the short-mid term frame.
CEO and managing director of Dmart portrayed a sunny picture of the retailer’s future. He stated there was no impact on the supply chain, and aggressive vaccination prompted people to again return to an offline form of shopping. For more news concerning this hypermarket retailer, keep an eye on the space here.
Frequently Asked Questions
- Who are the competitors of Avenue Supermarkets?
Grofers and Big Basket are the competitors of Avenue Supermarkets.
- What is the long-term prediction for this stock?
Given the Indian demographic, increasing disposable incomes and rapid urbanisation, this stock is likely to grow in the long term as well.
- What is the EBITDA for Avenue Supermarkets?
EBITDA for Avenue supermarkets was Rs. 221 crores in the June quarter. It surged 103% Year-on-Year.