Shares of Avenue Supermarts Ltd. jumped 15 percent in the morning deals on January 3, after the DMart operator shared its business update for the October-December period for FY2024-25.
Avenue Supermarts shares surge 15%
DMart reported a standalone revenue from operations of Rs 15,565.23 crore, showing a 17.5% increase compared to Rs 13,247 crore in the previous year. As of December 31, 2024, the total number of stores stood at 387.
At 9:20 am, the stock price of Avenue Supermarts surged by ten percent, reaching Rs 3,972.2 on the NSE.
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International brokerages Macquarie and Morgan Stanley have maintained their pessimistic outlook on the stock, citing concerns about the slow growth trend that falls well below the historical 20 percent top-line growth for the business.
Morgan Stanley did acknowledge that the standalone Q3 revenue exceeded its expectations by one percent, driven by a 12 percent increase in store count. The implied same-store sales growth (SSSG) was approximately 5.5 percent, higher than the estimated four percent. The brokerage reaffirmed its target price for DMart shares at Rs 3,702 each, suggesting a four percent upside potential.
Macquarie expressed worries about competitive pressures from quick commerce, which are hindering growth momentum. Additionally, the third quarter typically sees a rise in gross margin due to a better product mix. The 10-store additions by DMart were in line with Macquarie’s projections.
Conversely, Hong Kong-based CLSA expressed optimism about Avenue Supermarts, maintaining its outperform rating with a target price of Rs 5,360 per share, indicating a significant 50 percent upside potential.
CLSA highlighted that the standalone revenues surpassed its forecasts, leading to a positive outlook. In December, CLSA also expressed bullish sentiment towards DMart due to its focus on private labels, positioning it well to compete effectively. Private labels are brands owned and exclusively sold by the retail store.
In Q2FY25, the net profit of the retail giant increased by 5.8 percent year-on-year, reaching Rs 659.6 crore compared to Rs 623.6 crore in the same period the previous year. For the quarter, Avenue Supermarts’ revenue grew by 14.4 percent year-on-year to Rs 14,444.5 crore, up from Rs 12,624.4 crore in the previous year.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.