HSBC Upgrades DMart Supermarket Chain, Predicts 21% Upside With Buy Rating

Avenue Supermarts, the company behind the popular DMart supermarket chain, has attracted attention as global financial services firm HSBC has recently upgraded its outlook on the stock. HSBC has shifted its rating on Avenue Supermarts from 'hold' to 'buy' and raised the target share price to Rs 4,600 per share, up from the previous Rs 4,000.

This upgrade implies a potential upside of nearly 21 per cent compared to the stock's closing price of Rs 3,810 on the BSE as of the previous trading day.

HSBC's rationale for the upgrade centers on Avenue Supermarts' recent performance. The company had been grappling with sluggish merchandise sales and a slower pace of store expansion, which had weighed on its growth. However, HSBC now sees an attractive risk-reward profile for the stock.

HSBC noted that DMart's management appears to be emphasising the expansion of its network as a key driver of value creation. Additionally, the impact of general merchandise sales has been diminishing, and DMart is planning to revamp its fashion segment.

HSBC predicts that the third quarter of the fiscal year 2023-24 could witness a substantial rebound in revenue growth for Avenue Supermarts, which could serve as a catalyst for a higher share price.

In conclusion, HSBC finds the valuation of DMart's stock more appealing following these developments.

As of Thursday, shares of Avenue Supermarts were trading at Rs 3,817.25 per share, marking a 0.2 per cent increase at 9:31 AM on the BSE. Over the past month, the stock has risen nearly nine percent, although it has experienced a 15 per cent decline over the past year.

Last week, the company made headlines when it purchased commercial property valued at Rs 88 crore in Mumbai for the purpose of opening new stores. These commercial units are situated in the Kandivali West area.