Avenue Supermarts shares gain 5% as ICICI Securities forecasts stock to outperform Nestle in medium term

In its note, ICICI Securities said that DMart's premium over Nestle has decreased significantly from approximately 50% over the last two years to around 8% currently. This suggests that DMart's valuation has become more attractive compared to Nestle.

Further, DMart is perceived to have fewer downside risks compared to Nestle. This implies a more stable and potentially resilient business model for DMart.

Moreover, DMart has demonstrated a robust revenue growth trajectory, with an expected Compound Annual Growth Rate (CAGR) of 18-21%. Additionally, its same-store sales growth (SSSG) consistently ranges between 6-10% higher than other Fast Moving Consumer Goods (FMCG) companies, indicating strong consumer demand and market positioning.

Despite potential margin pressures, DMart maintains healthy net profit margins, indicating operational efficiency and effective cost management strategies.

On the other hand, the recommendation to maintain 'Hold' on Nestle is based on the assessment that the positives driving Nestle's performance have largely been factored into its current stock price.

Additionally, while Nestle has shown strong revenue growth compared to its peers, this outperformance is expected to decelerate, partly due to potential price hikes already incorporated into its base, the brokerage firm observed.

Shares of Avenue Supermarts were trading at ₹4,480 apiece, up 4.31% on the BSE at around 10:45 am.