Stocks to buy: DMart, Cera, La Opala among preferred retail stock picks for up to 33% upside

Demand trends for the retail companies remained moderate. According to analysts, companies catering to the mid-premium and premium segment outperformed its other counterparts till the last quarter. 

Centrum Broking expects a similar trend to continue albeit at a slower pace. Within apparel, it expects Trent to continue to be an outlier registering solid sales growth of 41%. 

Within footwear, Metro will outpace Relaxo Footwears, Campus and Bata India. Grocery segment is expected to register recovery led by Avenue Supermarts (DMart), while the luggage sector will continue to grow at a strong pace led by a healthy travel trend with Safari Industries and VIP registering +18 and +7% sales growth. 

“From our building materials universe, we expect PVC pipes manufacturers – Supreme Industries followed by Astral to report healthy pipes volume growth (+22/18%). EBITDA margins for PVC pipes players are expected to improve sequentially led by benign RM prices. Cera Sanitaryware is expected to report growth of 10% on a stable margin profile,” Centrum Broking said in a report.

Also Read: Stock picks: Coforge, Mastek, Birlasoft among Sharekhan’s preferred midcap IT stocks to buy ahead of Q2 results

Centrum Broking’s preferred picks are Avenue Supermarts, Safari Industries, Cera Sanitaryware and La Opala RG.

Avenue Supermarts | Buy | TP: ₹5,055

The brokerage firm has a ‘Buy’ rating on the Radhakishan Damani-led Avenue Supermarts, the DMart retail chain operator, and has a target price of ₹5,055 per share, implying an upside potential of 33% from Monday’s closing price.

Avenue Supermarts is expected to report an 18.5% year-on-year (YoY) revenue growth at ₹12,307.7 in the quarter ending September 2023. The company’s net profit is likely to fall 7.5% YoY to ₹675.9 crore in Q2FY24.

Safari Industries | Buy | TP: ₹3,995

Safari Industries, the luggage and travel bags manufacturer, is expected to report a net profit of ₹36.9 crore in the second quarter of FY24, registering a growth of 42.9% YoY. The company’s revenue may rise 18% YoY to ₹371.6 crore, as per Centrum Broking’s estimates.

The brokerage firm has a ‘Buy’ call on the stock with a target price of ₹3,995 per share.

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Cera Sanitaryware | Buy | TP: ₹9,807

Cera Sanitaryware’s revenue in the July-September quarter of FY24 is estimated to rise 10% YoY to ₹457.5 crore, while net profit is expected to jump 15% YoY to ₹58.8 crore.

Sanitaryware segment is better placed compared to tiles and wood panel segments as per the channel feedback, the brokerage said.

It has a ‘Buy’ rating on the stock with a TP of ₹9,807 per share, implying an upside of nearly 20% from Monday’s closing price.

Also Read: Stocks to buy: ICICI Bank, IndusInd Bank, BoB among Motilal Oswal’s top picks in financial services sector

La Opala RG | Buy | ₹530

La Opala RG is a leading manufacturer and marketer of lifestyle products in the glassware segment. However, Centrum Broking expects La Opala to register a 20% YoY decline in sales to ₹107.9 crore and 16.5% drop in Q2FY24 net profit to ₹32.6 crore.

The broking firm has a ‘Buy’ rating on the stock with a target price of ₹530 per share, expecting an upside of 22% from Monday’s closing price.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.