Shares of Radhakishan Damani-led Avenue Supermarts (DMart) fell nearly 4 per cent in Monday’s trade, as the retailer’s September quarter results disappointed investors on several counts. Inflationary stress remains acute in the lower price points in discretionary non-FMCG categories, analysts said adding that footfalls continued to remain below the pre-Covid level, even as the average basket size improved. Overall, analyst views differ widely on the stock, with price targets for DMart ranging roughly between Rs 3,000 and Rs 5,000.
On Monday, the scrip fell 3.66 per cent to hit a low of Rs 4,145.70 on BSE.
The retail chain owner reported a 64.13 per cent rise in its consolidated net profit at Rs 685.71 crore in September quarter. DMart’s operational performance was subdued, with profitability coming below consensus estimates, said ICICIdirect.
Footfalls are yet to recover completely compared to the pre-Covid levels, which is causing a major hindrance for the recovery of its profitable segment general merchandise & apparel, ICICIdirect said.
No new trigger seems to be emerging for the time being, said JM Financial, which has a target of Rs 4,535 on DMart.
HDFC Securities has a ‘sell’ rating on the stock with a target price of Rs 2,950. Kotak Institutional Equities has a fair value for DMart at Rs 3,725. Nuvama Institutional Equities sees the stock at Rs 4,310. Motilal Oswal has a target of Rs 4,100 on the scrip while Prabhudas Lilladher sees the stock at Rs 5,121.
ICICIdirect said DMart has been a consistent compounder with stock price increasing at 35 per cent compounded annually in the last five years.
“DMart continues to remain India’s most profitable low-cost retailer and a strong play on India’s retail growth story and a key beneficiary of unorganised to organised segment shift. However, we believe current valuations captures most positives,” it said while suggesting a target of Rs 4,900 on the stock said.
Motilal Oswal Securities said that the recovery in the revenue per store indicates that DMart has reached above the pre-Covid level but nearly 20 per cent higher average store size and weak demand in non-food category are impacting its revenue productivity adversely on a per square feet basis, it said.
This brokerage is expecting FY23 store additions to be at 45 from 40 earlier and is factoring in FY22-24 Ebitda and PAT growth of 45 per cent and 51 per cent, compounded annually, respectively.
Calling DMart’s Q2 numbers as a mixed bag, Kotak Institutional Equities said lower-than-expected gross margin (GM) and higher-than-expected other operational expenses drove a 7 per cent Ebitda miss.
DMart posted a same store sale growth (SSSG) of 41.6 per cent on a weak Covid impacted base in H1FY23, it said while modestly tweaking its FY2023-25 EPS.
