DMart share price falls over 4% after Q2 results miss estimates; should you buy, sell or hold?
- Avenue Supermarts, the operator of DMart retail chain, on October 14 reported a consolidated net profit of ₹623.35 crore for the second quarter of FY24, registering a drop of 9.09% from ₹685.71 crore in the year-ago period.
DMart shares declined over 4% in early trade on Monday after the company reported its earnings for the quarter ended September 2023. Avenue Supermarts or DMart fell as much as 4.09% to ₹3,771.70 apiece on the BSE.
Avenue Supermarts, the operator of DMart retail chain, on October 14 reported a consolidated net profit of ₹623.35 crore for the second quarter of FY24, registering a drop of 9.09% from ₹685.71 crore in the year-ago period.
The company’s consolidated revenue from operations in Q2FY24 grew 18.66% to ₹12,624.37 crore from ₹10.638.33 crore, YoY.
Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) during the quarter stood at ₹1,005 crore, as compared to ₹892 crore in the corresponding quarter of last year. EBITDA margin compressed to 8.0% from 8.4%, YoY.
Read here: DMart Q2FY24 results declared. Total revenue of Avenue Supermart jumps 18.5% to ₹12,308 crore
“Our gross margins continue to be lower compared to the same period in the previous year due to lesser contribution from the higher margin General Merchandise and Apparel business,” said Neville Noronha, CEO & Managing Director, Avenue Supermarts.
Here ‘s what brokerages have to say on Avenue Supermarts' Q2 results and stock price:
Nuvama Institutional Equities
Avenue Supermarts, after a positive spurt in productivity, again reported a miss with EBITDA up only 12% YoY as General Merchandise & Apparel (GM&A) share stayed below pre-Covid and was even down YoY, a surprise. SSSG for H1FY24 at 8.6% was stable, in-line with annual estimate of 8.5%.
“Productivity recovery/footfalls without commensurate mix improvement is concerning. Hence, we adjust our estimates for lower GM&A share/gross margin. Also, store addition, while bunchy, has a steep catch-up in H2FY24. We adjust that also lower, leading to a 6% PAT cut,” Nuvama said.
The brokerage retained ‘Hold’ rating on the stock with a target price of ₹4,021 per share.
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Motilal Oswal Financial Services
DMart clocked 19% revenue CAGR over FY20-23 led by 20% footprint additions. Subdued SSSG was mainly due to the additions of bigger stores over the last couple of years (20% rise in average store size), and weak discretionary demand (share of discretionary items reduced to 23% in FY23 from 27% in FY20), it said.
Motilal Oswal has cut FY24 PAT estimates by 4.6% on slower recovery in H1FY24E but expects gradual improvement from H2FY24E factoring in a revenue and PAT CAGR of 25% and 26% over FY23-25 aided by 16% and 8% growth in footprints and revenue productivity.
It reiterated ‘Buy’ rating on the stock and a target price of ₹4,500 per share.
Also Read: ICICI Securities to consider interim dividend along with Q2 results today, sets record date
Centrum Broking
“We remain attracted by DMart’s sharp execution skills and large opportunity size. The organized grocery retail industry penetration is at 4-5% in India giving enough headroom for the company to grow,” Centrum Broking said.
It adjusts EPS estimates for FY24/25 by -6/-12% each respectively. It maintained ‘Buy’ rating valuing the stock at 80x 1HFY26 EPS estimates to arrive at a target price of ₹5,006 per share.
Antique Stock Broking
Avenue Supermarts’ Q2FY24 performance was primarily affected by the underperformance of general merchandise, which in turn led to a 52 bps YoY drop in gross margin to 14%. During 1HFY24, the general merchandise share of revenue dropped to 23.2% from 24.8% in the previous corresponding period.
The brokerage cut its FY24 and FY25E EBITDA estimates by 8% and 7% respectively. It downgraded the stock to ‘Hold’ and cut the target price to ₹3,893 per share.
At 9:30 am, DMart shares were trading 2.49% lower at ₹3,835.00 apiece on the BSE.
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.
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