Top Retail Stock Picks: DMart, Cera, and La Opala Among Preferred Choices with Upside Potential of Up to 33%

Retail sector analysts are optimistic about select retail companies, with a focus on mid-premium and premium segments that have outperformed their counterparts in recent quarters. While demand trends in the retail industry have remained moderate, there is an expectation that this trend will continue, albeit at a slower pace.

Centrum Broking anticipates a continuation of this trend, with certain companies standing out. Within the apparel segment, Trent is expected to shine with solid sales growth projected at 41%. In the footwear category, Metro is expected to outperform Relaxo Footwears, Campus, and Bata India. The grocery sector is poised for recovery, led by Avenue Supermarts (DMart), while the luggage sector is expected to maintain robust growth, driven by healthy travel trends, with Safari Industries and VIP projecting sales growth of +18% and +7%, respectively.

Centrum Broking also highlights positive expectations for PVC pipes manufacturers, with Supreme Industries and Astral anticipated to report healthy volume growth of +22% and +18%, respectively. EBITDA margins for PVC pipes players are expected to improve sequentially due to favorable raw material prices. Cera Sanitaryware is predicted to exhibit 10% growth with a stable margin profile.

Centrum Broking’s preferred stock picks in the retail sector include Avenue Supermarts, Safari Industries, Cera Sanitaryware, and La Opala RG.

1. Avenue Supermarts | Buy | Target Price: ₹5,055

Avenue Supermarts, the operator of the DMart retail chain led by Radhakishan Damani, is recommended with a ‘Buy’ rating and a target price of ₹5,055 per share. This suggests an impressive upside potential of 33% from Monday’s closing price. Revenue for Avenue Supermarts is expected to grow by 18.5% year-on-year (YoY) to ₹12,307.7 million in the quarter ending September 2023. However, the company’s net profit may decline by 7.5% YoY to ₹675.9 crore in Q2FY24.

2. Safari Industries | Buy | Target Price: ₹3,995

Safari Industries, a manufacturer of luggage and travel bags, is poised to report a net profit of ₹36.9 crore in the second quarter of FY24, reflecting a significant YoY growth of 42.9%. Revenue is estimated to rise by 18% YoY to ₹371.6 crore, as per Centrum Broking’s projections. The stock receives a ‘Buy’ call with a target price of ₹3,995 per share.

3. Cera Sanitaryware | Buy | Target Price: ₹9,807

Cera Sanitaryware is expected to achieve a 10% YoY increase in revenue for the July-September quarter of FY24, reaching ₹457.5 crore. Net profit is projected to jump by 15% YoY to ₹58.8 crore. The sanitaryware segment is considered to be in a better position compared to tiles and wood panel segments, according to channel feedback. Centrum Broking maintains a ‘Buy’ rating on the stock with a target price of ₹9,807 per share, indicating a potential upside of nearly 20% from Monday’s closing price.

4. La Opala RG | Buy | Target Price: ₹530

La Opala RG, a prominent manufacturer and marketer of lifestyle products in the glassware segment, is expected to report a 20% YoY decline in sales to ₹107.9 crore and a 16.5% drop in net profit in Q2FY24, which is estimated to reach ₹32.6 crore. The stock is recommended as a ‘Buy’ with a target price of ₹530 per share, implying an upside of 22% from Monday’s closing price.