D-Mart surpasses Axis Bank, L&T in market-cap ranking as stock hit new high

Avenue Supermarts, the owner of D-Mart chain of retail stores, surpassed private sector lender Axis Bank and the construction and engineering giant Larsen & Toubro (L&T) in market capitalisation (market-cap) ranking as the stock of the department stores hit a new high on the BSE in intra-day trade on Monday.

At 11:41 am, with market-cap of Rs 2.36 trillion, Avenue Supermarts stood at the number 16th position in the overall market-cap ranking, ahead of L&T (Rs 2.332 trillion) and Axis Bank (Rs 2.334 trillion), the BSE data shows. The fast-moving consumer goods (FMCG) and cigarettes company ITC, with Rs 2.61 trillion market-cap stood ahead of Avenue Supermarts, data shows.

Avenue Supermarts is a Mumbai-based company, which owns and operates D-Mart stores. D-Mart is a national supermarket chain that offers customers a range of home and personal products under one roof. The company offers a wide range of products with a focus on Foods, Non-Foods (FMCG) and General Merchandise and Apparel product categories.

As of June 30, 2021, the company had 238 stores with Retail Business Area of 9.01 million sq. ft. across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab.

Shares of Avenue Supermarts hit a new record high of Rs 3,655.95, up 1.73 per cent on the BSE in intra-day trade. In the past three months, the stock has outperformed the market by surging nearly 30 per cent, as compared to a 14 per cent rise in the S&P BSE Sensex.

Despite lower-than-expected margins during the April-June (Q1FY22) quarter, due to the restrictions on the sale of non-essential goods which fetch higher margins than the staples segment, the stock has outperformed the market.

The management had said it has not seen any significant impact on the supply chain during the quarter. "The inventory is also gradually moving towards normal levels. Lockdown measures are now gradually reducing across multiple cities. The D-Mart Ready business continued its gradual expansion across the MMR region, Ahmedabad, Pune, Bangalore and Hyderabad. Thus far the results on the topline are very encouraging. The second wave has given further impetus to the business," the management said.

Analysts at ICICI Securities anticipates store addition trajectory to accelerate in FY22, FY23E and bake in 80 incremental store additions (addition of around 5.0 mn sq. ft). The robust liquidity position and healthy operating cashflows to provide impetus to store addition pace, the brokerage firm said. Analysts expect revenue recovery to pick up pace from H2FY22 onwards and model revenue, earnings CAGR of 21 per cent, 25 per cent, respectively, in FY20-23E.

Despite trading at premium valuations, Avenue Supermarts has been a consistent compounder with stock price appreciating at 31 per cent CAGR in the last three years. We continue to remain structurally positive and maintain HOLD rating, the brokerage firm had said in the result update.

“Covid second wave has slowed the recovery momentum, but we do not expect disruptions like last year given ongoing vaccination and better knowledge to tackle the pandemic. We believe, D-Mart has strong recovery potential given a healthy balance sheet and strong operational efficiency,” analyst at Geojit Financial Services said. The stock, however, was trading above the brokerage firm's target price of Rs 3,480 per share.