Shares of Avenue Supermarts, the operator of D-Mart, experienced an increase on March 13, following the company’s announcement of the opening of two new stores in Proddatur, YSR Kadapa in Andhra Pradesh, and Shirdi, Maharashtra.
This expansion follows shortly after the supermarket chain opened a new store in Bengaluru, Karnataka. With these additions, Avenue Supermarts now operates a total of 350 stores across India. Morgan Stanley has issued an ‘overweight’ rating on Avenue Supermarts, setting a target price of Rs 4,471 per share. The brokerage emphasized that DMart Ready, the company’s delivery platform, excels not only in quick delivery but also in pricing strategy and SKU availability, outpacing its competitors.
“DMart maintains its positioning as a value-focused retailer. Additionally, DMart Ready leads in SKU availability compared to its peers and is showing sequential improvement,” noted Morgan Stanley in a statement.
While comparable to grocery e-commerce players, Avenue Supermart’s delivery service does not directly compete with quick commerce, the brokerage added.
On March 12, DMart shares closed 1 percent higher at Rs 4,028.40 on the National Stock Exchange (NSE). Over the past year, the stock has risen by 20 percent, underperforming the benchmark Nifty 50, which has risen by 30 percent during the same period. In a previous report, Morgan Stanley highlighted DMart as its preferred choice among online grocers, despite not being the primary e-commerce platform or offering instant delivery.
The total addressable market for the supermarket chain is substantial enough for online, offline, and quick delivery to coexist, according to the brokerage. Furthermore, DMart’s profitability contributes to its positive outlook.
“We believe DMart is pursuing a grocery-first strategy to re-engineer growth. Macro headwinds are in the past and general merchandise should start picking up in the coming quarters,” stated Morgan Stanley. The company has taken steps to address its apparel business, and if the segment does not return to previous levels, DMart plans to horizontally scale in non-FMCG categories to drive growth, the foreign brokerage added.