INSUBCONTINENT EXCLUSIVE:
Mumbai: Morgan Stanley has forecast a downside of 23 per cent in shares of Radhakishan Damaniowned Avenue Supermarts, which owns DMart,
owing to competition-related headwinds.
The stock, which has rallied nearly four times from its issue price of Rs 299 since listing two
years ago, ended down 1 per cent at Rs 1,460.95 on Friday following the report.
Morgan Stanley initiated coverage on Avenue Supermarts with
Morgan Stanley.
Moreover, margin dilution from DMart Ready may be higher than market estimates and investors may also be underestimating the
cannibalisation of in-store sales
While competitors may have underestimated the power of leverage but they are now focusing their business models with a focus on lower
pricing for grocery, the financial services firm said.
All this is not factored into the valuations of the stock, which is trading at 60
cent compounded growth in earnings over the next ten years but it sees downside risks to estimates if price competition continues to rise
and online fulfilment accelerates.
Avenue Supermarts had reported a 2.1 per cent year-on-year rise in profit after tax at Rs 257 crore for
the December quarter, while revenues jumped 33.2 per cent to Rs 5,451crore.
Bloomberg data showed 11 of the 19 analysts tracking the stock
We believe DMart will continue to focus on revenue growth (via both offline and online channels), though future margin expansion may be
