Shares of Radhakishan Damani-owned Avenue Supermarts (owners of DMart) slumped 8.48 per cent on Monday following weaker-than-expected results posted by the company. As analysts turned cautious on the stock with some revising the target price downwards, marketmen pressed the sell button on the counter.
The stock tumbled 8.48 per cent to ₹4,184.45 on the BSE and 8.35 per cent to ₹4,191 on the NSE.
On Saturday, owners of DMart reported a 5.78 per cent increase in its consolidated net profit at ₹659.44 crore for the second quarter ended September 2024. The company had posted a net profit of ₹623.35 crore a year ago, it said. Its revenue rose 14.41 per cent to ₹14,444.50 crore (₹12,624.37 crore).
Overlap of consumers seeking convenience and shopping at DMart (value) appears to be higher than expected which should continue to impact its growth trajectory, said ICICI Securities. “Further, scale-up of DMart Ready continued to be significantly lower (+21 per cent year on year in H1FY25) vs quick commerce despite lower absolute size. In the context of disruption from quick commerce, we downgrade stock to REDUCE (from Add) with revised TP of ₹4,100.
Axis Securities, which lowered the price target to ₹4,200 from ₹4,550, said: “We recommend a wait-and-watch approach as we look for more sustained improvement in the store matrix and demand recovery triggers.”
Global investment advisory firm Citi maintained its Sell on the company with a target price of ₹3,500.
“An aggressive review of the business model is required,” Morgan Stanley said. The company’s slow response to steadfast market changes toward convenience is starting to hurt the business, it added. More importantly, the management commentary about competition from online grocery affecting LFL growth puts doubt on 20 per cent top-line growth could lead to further de-rating, it said.
Bullish view
However, Motilal Oswal remained bullish on the stock. DMart’s revenue growth remains dependent on its ability to add store area, it said, adding “with the increase in capex, we believe store additions can pick up pace starting H2FY25. We model 40/45/50 store additions in FY25/FY26/FY27.” The domestic brokerage retained its Buy rating on the stock with a target price of ₹5,300.
The global financial advisory firm Bernstein is even more bullish on the stock; it retained its Outperform stand on the stock with a target price of ₹5,800.