Stock market outlook
The current market price (CMP) of the share is Rs 1,409 each on BSE. Today, it opened at Rs 1,407.80, currently trading 0.70% above the previous close. The stock’s 52-week low is Rs 598.55 each and the 52-week high is Rs 1,528.70 each on BSE, respectively.
Returns on investment
It has given a negative return of 1.45% over the past week. While in the last month it gave a positive return of 11.93%. Over the last 3 months, the stock has given a positive return of 89.64%. Over the past year, it has given a positive return of 64.31%. Over the past 5 years, it has given a positive return of 2,744.6%, respectively.
Bet on rising domestic demand for consumer electronics and home appliances
AVL is one of the fastest growing electronics retail chains in Bihar. It aspires to expand the reach of its brand throughout the heartland of Hindi through a presence of 155 retail stores. The heart of Hindi, before India achieved 100% electrification, was the least penetrated. As a result, adoption of appliances/electronics was also the lowest. However, with India being nearly 100% electrified, we expect the Hindi core to maintain strong growth in consumer durables adoption over the medium term. AVL, by virtue of its strategy of focusing on this geography, will have a skewed high growth trajectory far ahead of other distribution chains.
Broker Comments
The brokerage said: “We expect AVL’s revenue/EBITDA/PAT to grow at a CAGR of 34.9%/28.8%/34.6% to 2,206.8/177, 6 / INR 86.0 cr during FY22-25 We expect EBITDA margins to deteriorate from FY22 onwards thanks to new store expansion, while net margins are expected to remain the same at exercise 22 levels.”
The brokerage firm added: “AVL’s total debt is only expected to increase by INR 14.5 cr to INR 129.2 cr even as the company embarks on its store expansion strategy. We expect AVL to will generate INR 602.8 cr of operating cash flow over the next 3 years leading to a net debt-free status (net debt/equity at -1.0x in FY25).”
Valuation – Buy for Rs 2,309
AVL has always enjoyed high rates of return. However, these are expected to moderate slightly over the forecast period, mainly due to the acceleration of new store openings. “We expect RoE/RoCE return ratios of 32.9%/28.8% respectively in FY25,” the brokerage said.
“We are initiating a hedge on AVL with a BUY for a 24-month price target of INR 2,309 (32.3X FY25 earnings) representing a 58% upside from the CMP of 1,459,” said added the brokerage.
Disclaimer
The stock was selected in the Ventura Securities brokerage report. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.
