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Investing.com - CLSA has reiterated its High-Conviction Outperform rating on Avenue Supermarts (DMART:IN) with a price target of INR6,408.00, representing a 41% upside potential.
The research firm identifies DMart as one of the most profitable value retailers in India, highlighting its unique position of maintaining very low gross margins while achieving high operating margins compared to global peers.
CLSA notes that only Costco (NASDAQ:COST) and Tesco (OTC:TSCDY) have lower gross margins in their global comparison group, while only Walmex surpasses DMart in operating margins, attributing this performance to DMart’s tight control over operating costs.
The firm explains that while lower wages in India contribute to DMart’s cost advantage, the retailer stands out even among domestic competitors with its combination of lower gross margins and higher operating margins in the grocery business.
CLSA considers DMart to be at a very early stage of evolution regarding store density and has positioned it as one of their top picks in the India consumer sector.
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