DMart on FII shopping list

Avenue Supermarkets or Dmart stock is on the run again. The stock price surged 5.5% to Rs.1085 and remains firmly in the green. Its 52-week high is at Rs.1117.70.

Two news from DMart. One is that the promoter and founder, Damani has been listed by the Hurun India Rich List as the  biggest gainer this year, his wealth increasing 320%. The report stated that the rich in India could consolidate their wealth due to government policies such as the note ban in November last year and the roll-out of the goods and services tax (GST) in July this year. For Damani to make it to the list, it was thanks to the IPO success.

Second and more legitimate a reason for the stock rise is that FII Goldman Sachs stated that it has initiated coverage on the stock, giving it a “buy” with a price target of Rs.1586. The FII stated in its report that it is a big beneficiary of the GST as more and more of the unorganized sector in groceries will now shift to organized where DMart is already well established.

It expects DMart’s EBIT to show a 13 times growth over the next 10 years due to high growth, low margin and high return strategy.