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Motilal Oswal
Avenue Supermarts (Neutral)
Target: ₹2,000
CMP: ₹₹2,149.65
Avenue Supermart (DMart) hosted its annual analyst call, discussing in detail the current business environment, growth opportunity, online strategy, and means to combat the resurgence of strong online players. DMart re-emphasised its uniqueness in terms of right pricing and assortment. Furthermore, it highlighted creating a certain positioning and customer affinity that is ensuring swift recovery from the pandemic-led lockdown.
Avenue Supermarts has reopened most stores, and sales have reached nearly 80 per cent across assortments as customer traffic is gradually returning to stores given the brand’s value offering. However, the profile of customers has changed to lower middle and middle class v/s upper middle class, which is still wary of stepping out and therefore prefers to shop online.
The recent price correction, expectation of swift recovery post Covid-19, and continued cost/price competitiveness should hold the company in good stead. However, the growing scale of online retailers, including the prominence of deep-pocket players such as Amazon and Reliance Retail, and the potential moderation in growth and the return profile may restrict a re-rating. We upgrade from Sell to Neutral
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