Avenue Supermarts, the operator of retail chain DMart, has received a third hike in target price by Hong Kong-based CLSA, which sees the firm’s store expansion as a key driver of its growth.

What Happened: While maintaining a “buy” stance on the stock, CLSA set a new target price of ₹5514, up from the previous ₹5307, suggesting potential gains of over 23% from its previous close.

CLSA’s optimism stems from Avenue Supermarts’ robust store expansion during the quarter ending March, reaching an all-time high of 21 new stores. According to the company’s exchange filing on Sunday, it opened three new stores in Pune, Bengaluru and Nashik, bringing the total store count to 365.

CLSA believes that this acceleration in store additions will address some investor concerns and enhance the company’s product mix and gross margins.

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The Larger Thesis: The brokerage anticipates a shift in focus towards the company’s quarterly sales releases. CLSA’s previous target price upgrade highlighted the potential benefit for the retail company from rising palm oil and crude oil prices, which could offer pricing flexibility in the upcoming fiscal year 2025.

Macquarie also shares a bullish sentiment on Avenue Supermarts, maintaining an “outperform” rating and raising the target to ₹4,500 from ₹4,350. Meanwhile, ICICI Securities said it preferred DMart over Nestle, citing more favorable valuations.

What Happened: Avenue Supermarkets’ share price was down 1.24% at ₹4,427.90. Over the past month, Avenue Supermarts’ stock has surged by over 16%, with a one-year return of 33%.

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