Daily Mail India
Daily Mail India

Morgan Stanley has ‘overweight’ rating on Avenue Supermarts; target price Rs 2,758

Mumbai: Morgan Stanley has initiated protection on DMart grocery store chain’s guardian firm Avenue Supermarts with an ‘obese’ rating and a target price of Rs 2,758 on expectation of sturdy progress in income going forward.

Shares of Avenue Supermarts have gained 78% within the final one 12 months and have risen 30% within the final three months.

The brokerage mentioned {that a} substantial alternative has opened up for retail gamers like DMart as India transitions to fashionable retail codecs.

Strong money technology potential will doubtless drive a 3.7 occasions rise in retailer rely mixed with a 21% income CAGR over the subsequent ten years.

Morgan Stanley mentioned that based mostly on its residual earnings mannequin, DMart is about 13% under honest worth and implies that its return on capital and potential progress usually are not priced in.

The brokerage believes that price effectivity, economies of scale and balance-sheet energy are DMart’s moat and it additionally brings worth to clients through low price factors, to workers through possession and to suppliers by way of scale.

“We forecast it will turn free cash flow positive in F24 despite the strong pickup in store additions from here. Moreover, FCF to net profit should rise to 52% by F30 (FY30),” mentioned Morgan Stanley.

India’s nation dynamics additionally favour the corporate, as rising per capita earnings, the formalization of a extremely unorganized grocery market, an increase in urbanization from 30%, and the growing dimension of retail shops counsel vital alternatives for contemporary retail penetration in India, underpinning a positive macro surroundings for DMart.

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