Avenue Supermarts, which operates the D-Mart hypermarket chain, gained almost 2 percent in the early trade on January 15 after the parent company reported a 17 percent rise in net profit for the December quarter of FY24.
The supermarket chain operator reported a consolidated net profit of Rs 690.41 crore for the October-December quarter.
At 9.18 am, the stock was trading at Rs 3,905.25 on the National Stock Exchange, up 1.7 percent from the previous close.
Avenue Supermarts recorded a consolidated revenue of Rs 13,572.47 crore, marking a 17.31 percent year-on-year increase. Its EBITDA came in at Rs 1,120 crore against Rs 965 crore in the corresponding quarter of the previous year.
According to analysts, the performance was largely in-line with expectations amid gains from the festive season despite inflationary impact.
“Operating parameters also improved led by strong festive season,” said domestic brokerage Prabhudas Lilladher.
The company’s EBITDA margin came in at 8.3 percent, which was below the average Q3 EBITDA margin of 9 percent pre-Covid.
The company highlighted that sales this year were lower-than-expected in the non-FMCG segment. However, Prabhudas Lilladher said the drag was temporary and should bounce back as inflation would ease over the next one or two quarters.
Also Read | Avenue Supermarts Q3: D-Mart operator's net profit rises 17% to Rs 690 crore, revenue up 17.3%
“Employee costs/other opex both increased quarter-on-quarter as the company opened five new stores in Q3FY24,” said Nuvama Institutional Equities.
On a sequential basis, this is lower from the nine stores opened in the quarter ended September. D-Mart has cut down the number of store openings to 40/45 for FY24/25.
Nuvama adjusted its store addition guidance downward to 32 from 45 for the current fiscal. “Factoring in the same, we adjust FY24/FY25 PAT down by 1 percent/3 percent,” the brokerage said.
Over the past six months, the Radhakishan Damani-led Avenue Supermarts stocks has gained 3.5 percent. In comparison, the benchmark index Nifty is up 11 percent.
Should you buy, sell or hold?
Prabhudas Lilladher cut the target price to Rs 4,484 from Rs 4,724 ahead of the earnings. The brokerage maintained its “buy” call, though it expects returns to be back-ended. “D-Mart has a huge runway to grow with 1,500+ store potential in the duopoly market and scale up in DMart Ready,” the brokerage added.
Nuvama maintains its “hold” call on the stock. The brokerage firm values the company at 70x PE yields with a revised target price of Rs 4,089, up from earlier Rs 4,021.
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