Shares of Radhakishan Damani led-DMart (listed as Avenue Supermarts) are in a downtrend for the last 16 months. DMart stock, which hit at an all-time high of Rs 5,899 on October 18, 2021 was trading at Rs 3,606 today, translating into a loss of 39 per cent or Rs 2,293 during the period. The stock has turned weak due to high inflationary pressure and rising competition over the past two years, said analysts. The discount supermarket chain is expected to face stiff competition from billionaire Mukesh Ambani-led Reliance Retail. According to reports, Damani plans to raise the store count of DMart stores to 1,500 from the current 304 to face competitive pressures in the industry.
Meanwhile, the stock is also trading 28% lower to its 52-week high of Rs 4,606 on the BSE. The retail stock has lost Rs 1013 or 28.19% from the yearly high, confirming bearish momentum in the Damani-led sectoral leader
In the current trading session, DMart stock was trading 1.59% lower at Rs 3,592 against the previous close of Rs 3,650.35 on BSE. DMart shares have lost 20 per cent in a year and fallen 11.66 per cent since the beginning of this year. Total 0.18 lakh shares of the firm changed hands amounting to a turnover of Rs 6.61 crore on BSE. Market cap of the firm fell to Rs 2.32 lakh crore. The share hit a 52-week low of Rs 3,185 on May 16, 2022 .
In terms of technicals, the relative strength index (RSI) of DMart stock stands at31.9, signaling neither the stock is overbought nor oversold. The stock has a one-year beta of 0.9, indicating low volatility during the period. The PE ratio of DMart stands at 100.83 signaling the stock is overvalued compared to its industry. The PE of the mining industry stands at 82.99. Avenue Supermarts shares are trading lower than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.
ALSO READ: DMart Q3 results: Net profit rises 7% to Rs 589 cr; revenue increases 25.5%
In the third quarter of the current fiscal, earnings of DMart came below expectations. Avenue Supermarts reported a 9 per cent rise in its standalone net profit to Rs 641 crore against a standalone net profit of Rs 586 crore in the year-ago period. DMart operator’s Avenue Supermarts’ consolidated net profit rose 7 per cent to Rs 589 crore in Q3 FY23 from Rs 553 crore in the year-ago period. Consolidated revenue rose 25.5 per cent to Rs 11,569 crore.
The company’s standalone revenue jumped 25 per cent to Rs 11,305 crore as compared to Rs 9,065 crore in the same period a year ago.
Here’s a look at what analysts and brokerages said on the prospects of the stock amid the ongoing correction and post December quarter earnings.
Nagaraj Shetti, Technical Analyst, HDFC Securities said, “The stock price as per long-term charts like weekly has formed an important top reversal around Rs 5,900 levels in the month of October 21 and has been in a sharp downward correction since then. The overall chart pattern is looking weak and we expect D-Mart to slide to the next important support of around Rs 3200 levels in the next couple of months.”
Abhijeet from Tips2trade said, “Despite decent Q2FY23 results and a very consistently growing business, Dmart stock price is considerably down this month. Currently, the stock is very oversold and long-term investors should buy if we get a green candle on the daily charts for near term targets of 4210-4308.”
Jitendra Upadhyay, senior Equity Research Analyst, Bonanza Portfolio said ,”Stock price of Avenue Supermarts (D-Mart) corrected by over 20% from 52-week high as it has guided lower than expected gross margin at 14.8% in Q3FY23 (15.4% in Q3FY22) in its pre-quarterly update. Generally, Q3 tends to yield higher gross margins (over 15%) due to festive purchases in the general merchandise & apparel segment, but lower margin indicates inflationary pressure and higher competitive scenario over the past two years. However, D-Mart has added four new D-Mart outlets (22 in 9MFY23) taking the total store count to 306 with total business area of 12.6 million sq ft. Average square feet of new stores added is around 50,000 sq ft in 9MFY23 against 41,000 sq ft in FY22. Its online business, D-Mart ready, continues to perform well with revenue growth of 72% YoY. We believe, FMCG and staples will continued to outperform general merchandise and apparel segment but recovery in GM & apparel segment (25% of revenues), which yield better margins will lead to improvement in profitability going ahead.”
Brokerage Prabhudas Lilladher reduced Avenue Supermarts’ target price to Rs 4,675 from Rs 4,854 (earlier) following disappointing margin performance in Q3 FY23.
“We believe high inflation has impacted the discretionary spends in Q3 which surprisingly impacted even a deep value retailer like DMart. While grocery-centric DMart Ready ramp-up and competition could be other reasons, but we remain confident of the business moat, both in offline and DMart ready model,” the brokerage said.
Prabhudas retained a ‘Buy’ call on the counter while suggesting that “any meaningful correction can be used as a good entry point.”
Nuvama Research said Avenue Supermarts posted a weak Q3 FY23 performance on both counts. The company’s lower than pre-Covid level revenue growth/recovery, muted store addition and adverse mix dragged gross margin drove an EBITDA miss of 8 per cent, the brokerage said.
Also read: PTC India shares hit 5% upper circuit limit, gain for 3rd day on stake sale reports
Also read: What Rs 20,000 cr Adani Enterprises FPO says about stock market outlook? Basant Maheshwari decodes