D-Mart vaults after Goldman Sachs raise stock's rating

Last Updated: Tue, Sep 26, 2017 15:09 hrs
People look at a screen displaying India's Finance Minister Jaitley presenting the budget, on a facade of the Bombay Stock Exchange building in Mumbai

Avenue Supermarts is on song today, with investors thronging the counter after Goldman Sachs recommended a buy on the stock and setting a target price way above its last closing price.

Shares of Avenue Supermarts, the parent of department stores chain D-Mart, skyrocketed to an all-time high of Rs 1217 thanks to hectic buying at the counter. The brokerage expects the stock to move past Rs 1500 in about a year.

In its note, Goldman Sachs said that Avenue Supermarts will benefit immensely from tax reforms as grocery market share shifts to the organised sector. The firm says that Avenue Supermarts' cash return on capital invested remains better than its global retail peers. Avenue Supermarts' EBIT may rise 13 times in ten years, it adds.

Goldman Sachs believes Avenue Supermarts can see a 30% growth for the next ten years. Only a higher than expected competition from e-commerce, especially in the urban mass cohort, could pose a risk to Avenue's growth, it adds.

Following the sharp jump in the session, Avenue Supermarts' market capitalization surged past Rs 75,000 crore to around Rs 75,300 crore. After its stellar debut in March this year, following a highly successful IPO, Avenue Supermarts has been faring exceptionally well in the market.

The stock, which touched a high of Rs 1217, is currently at Rs 1128, up nearly 11% from its previous closing price.

On BSE, more than 1 million shares have changed hands at the Avenue Supermarts counter so far in the session, as against average daily volume of a little over 1 lakh shares. On the National Stock Exchange, the counter has clocked a volume of nearly 6 million shares so far in the session.

In the quarter ended June 2017, Avenue Supermarts reported a 47.6% year-on-year rise in net profit at Rs 174.77 crore. The RK Damani-promoted firm had reported Rs 118.44 crore profit in the corresponding quarter of last year.

In the June 2017-18 quarter, total income was Rs 3620.95 crore, up 36.3% (y-o-y) from Rs 2,657.27 crore revenue the company had recorded in the year-ago quarter.

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