Avenue Supermarts share price target raised by UBS on these four important factors

Shares of Avenue Supermarts Ltd. parent company of hypermarket chain DMart, will be in focus on Thursday, September 18, after brokerage firm UBS not only reiterated its positive stance, but also raised its price target.

UBS maintained its "buy" recommendation on Avenue Supermarts and raised its price target to ₹5,600 from ₹5,050 earlier. The revised price target implies a potential upside of 20% from Wednesday's closing levels.

The brokerage has called Avenue Supermarts a "major compounder" in India's consumption story. In the eight years since its listing in March 2017, shares of Avenue Supermarts have surged nearly 1,500% from their IPO price of ₹299. This, despite the stock correcting from its 52-week high of ₹5,484.

UBS has highlighted four factors as to why it continues to bet on Avenue Supermarts:

First, it expects DMart to enter a phase of significant rollout acceleration going forward. From opening nearly 130 stores in the last three years, DMart could go on to potentially open 230-250 stores in the next three years, thereby unlocking a significant growth acceleration trajectory.

Second, DMart is strengthening its e-commerce business DMart Ready's value propositions, which will further augment the company's offline growth trajectory, according to UBS.

Third, the consistent rise in Same Store Sales Growth for DMart, which was in high single-digits last year, has started to quell the narrative that the rapid rise of quick commerce will end up being a major threat to brick-and-mortar players like Avenue Supermarts. "It (DMart) is a winning business model for value-seeking middle and lower-middle income consumers, which DMart sharply focuses on," UBS wrote in its note.

and lastly, UBS believes that DMart is a key beneficiary of the rise of organised grocery retail of nearly $60 billion, and the single-digit penetration of organised retail could allow DMart to grow structurally between 18% to 22% for many years, thereby making their elevated valuations tenable.

Additionally, Avenue Supermarts could also see an expansion in its valuation multiples if it sustains its revenue growth above 20%.

Avenue Supermarts shares still offer a compelling risk-reward despite the recent rise in its share price. UBS' base case assumes a three-year Compounded Annual Growth Rate of 20% for its topline, which could limit any material valuation de-rating.

UBS' bull case has a price target of ₹6,600 for Avenue Supermarts, which assumes a revenue growth of 22% led by a faster network rollout and growth in DMart Ready. The bull case target implies a potential upside of 40% from Wednesday's closing levels.

Failure to execute network rollout in a timely manner and competition continuing to weigh on same store sales growth and margins, are some key risks highlighted by UBS for Avenue Supermarts.

32 analysts have coverage on Avenue Supermarts, the Radhakishan Damani-promoted company, of which 11 have a "buy" rating, 10 have a "hold", and another 11 have a "sell" rating. UBS' price target is the second highest on the street for Avenue Supermarts.

Shares of Avenue Supermarts ended 0.5% higher on Wednesday at ₹4,720. The stock has risen 33% so far in 2025, which is the best calendar year return that the stock has seen since 2021.