Retail stock

Avenue Supermarts Ltd, which runs the D-mart gro cery chain, is now the world’s most expensive retail stock, fol lowing a bumper listing in March and steady gains there after. Analysts believe the com pany’s long-term growth story remains lucrative, but do no rule out a near-term pause in the stock’s rally.

On its market debut on March 21, Avenue Supermarts rose 114.30% from its offer price, and has been gaining since. On Tuesday, it closed at ₹778.20, up 160.27% from the offer price. Its market cap is now ₹48,566.25 crore. A day earlier, its stock hi a record ₹806.80, achieving a market cap of ₹50,351.13 crore.

JP Morgan estimates 27% revenue and 34% earnings per share (compounded annua growth) over fiscal years 2017-20 driven by store additions healthy same-store-sales growth, inflation and modes margin improvement.

It believes the premium valu ations commanded by Avenue Supermarts are justified as i has almost 3-4 times EPS CAGR than the global/regional peers

JP Morgan expects Avenue Supermarts to post a EPS CAGR of 28% over calendar years 2017 2019, and those of American peers Wal-mart Stores Inc which is the world’s larges retailer, Costco Wholesale Cor poration, at around 7% and 11% respectively.

JP Morgan sees other Indian retailers Trent Ltd and V-mar Retail Ltd posting EPS CAGR o 34% over the same period.

“We were expecting it to reach ₹660 in 18 months. It is already beyond that level. The company’s operations are the best in the sector,” said R Srees ankar, head of research at Prab hudas Lilldher Pvt Ltd the bro kerage started covering the stock on March 21 with a “buy” rating”.

However, there is some dis comfort regarding valuation.

“The market cap of this com pany is around ₹50,000 crore. So if they have 150 stores right now the valuation would be valued a more than ₹300 crore per store,” said investment advisor Sandip Sabharwal, owner of Asksan dipsabharwal.com.

“One can buy an entire mal for that price (of one store).”

The supermarket chain, with a focus on value retailing opened its first store in Mumba in 2002, and had expanded to 118 outlets as of January 31.

Its net profit grew at a CAGR of 40 55% from fiscal 2014 to