Prabhudas Lilladher's research report on Avenue Supermarts
D’Mart 1Q21 shows full impact of COVID19 with lower footfalls, higher cost of operations and restrictions on sale of non-essentials. However, being positive at EBIDTA and PAT level shows the resilience of business model with little rentals and interest cost. Although recovery of 80%+ of pre-Covid sale in most stores operating without restrictions is positive, revival of traditional trade, rapid shift towards online formats and lower sales of higher margin apparel and general merchandise and costs related to sanitization and social distancing will impact profitability.
Outlook
Although D’Mart is a compelling play on Hypermart segment, valuations at 79.4xFY22 and 63.0xFY23 with current price justification at 8.3% terminal growth (post 2034) force us maintain REDUCE rating (Target price of Rs1695 46xFY23 EPS).
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