UBS gives DMart owner Avenue Supermarts a double upgrade
UBS's double upgrade of Avenue Supermarts, elevating it from a 'sell' to a 'buy' rating and substantially raising the target price, highlights the evolving landscape of the retail sector in India. The firm's optimism is rooted in a combination of positive cyclical trends, strong structural elements, and the potential for sustained growth in the medium term. This bullish outlook not only benefits Avenue Supermart but also provides valuable insights into the broader retail industry in India.
UBS, the global financial services giant, has executed a double upgrade for Avenue Supermarts, the parent company of popular retail chain DMart. This move comes as a significant shift in sentiment, as UBS has shifted its rating from 'sell' to 'buy' and substantially raised its target price for Avenue Supermarts' stock. The new target price now stands at Rs 4,700, a remarkable increase from the previous Rs 3,700.
This upgraded outlook from UBS is based on a combination of factors that highlight the potential for growth and resilience within the Avenue Supermarts business model. UBS analysts believe that several cyclical parameters are currently trending positively for the company.
Structurally, UBS's research indicates that DMart has ample room to coexist alongside industry giant Reliance Retail, positioning itself as a prominent national player.
One of the key implications of UBS's upgraded outlook is a significant revision in the estimated financial performance for the fiscal year 2025. The brokerage firm has substantially increased its projections, now anticipating revenue, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), and EPS (Earnings Per Share) to grow between 3 percent and 4 percent.
The medium-term outlook shared by UBS is equally encouraging. The firm expects that Avenue Supermarts' expansion efforts, specifically the addition of new stores, will serve as a catalyst for growth. Additionally, discretionary spending by consumers is poised to act as an upside driver for the company's financial performance.
This double upgrade from UBS signifies a notable shift in the perception of Avenue Supermarts within the investment community.
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(Edited by : C H Unnikrishnan)
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