Completed 07 Apr 2017 04:07 AM HKT Disseminated 07 Apr 2017 04:44 AM HKT Asia Pacific Equity Research 07 April 2017 Initiation Neutral Avenue Supermarts Limited AVEU.BO, DMART IN Value Retailer at Premium Multiples; Initiate with Price: Rs664.40 Neutral Price Target: Rs635.00 We initiate on Avenue Supermarts (ASL) with a Neutral rating and Mar-18 price India target of Rs635. ASL (operates stores under D-Mart brand), with a strong Consumer, Retail, Media execution track record, is a quality play on the Indian F&G retail sector in our AC opinion, being the fastest-growing and most profitable retailer. We forecast Latika Chopra, CFA 27%/34% revenue/EPS CAGR over FY17-20. However, significant gains post the (91-22) 6157-3584
[email protected] listing (120% above the offer price) lead to current valuations of 55x/42x Bloomberg JPMA CHOPRA <GO> FY18E/19E P/E, which fairly reflect the long-term growth opportunity in our J.P. Morgan India Private Limited view. Any minor lapse near term (store opening, comps, and/or margins) and Ebru Sener Kurumlu substantial investments in E-Commerce (earnings dilutive) could strain valuation (852) 2800-8521 multiples.
[email protected] Much to like here. Food retailing is about format and execution and in our J.P. Morgan Securities (Asia Pacific) Limited view ASL has been able to achieve this combination well. We like ASL’s execution capabilities, single format focus, best-in-class productivity metrics Price Performance (sales densities ~2-3x peers), prudent store expansion strategy and strong focus 650 on customer satisfaction partly aided by its ‘everyday low price’ positioning.