DMart Q3: Brokerages cut target price on Avenue Supermarts amid weak growth outlook, stock sinks 6%

Avenue Supermarts also announced that Neville Noronha will step down from the post of Managing Director and CEO after his current term ends.

Brokerages downgraded their ratings and slashed their target prices on Avenue Supermarts, which owns and operates the retail chain DMart, after the weak earnings report for the quarter ended December.

Avenue Supermarts reported a 4.9 percent increase in consolidated net profit at Rs 723.54 crore for the December 2024 quarter. It reported a net profit of Rs 690 crore in the corresponding quarter.

Its consolidated revenue grew 17.6 percent at Rs 15,973 crore, as against Rs 13,572 in the corresponding quarter. The company reported its EBITDA margin at 7.6 percent versus 8.3 percent in the same quarter of the previous year.

At open, DMart shares tumbled to Rs 3,469.95 per share, down 5.8 percent from the previous session's closing price.

The weak results were due to weaker gross margin and higher cost of retailing. The firm's management indicated that increased intensity in discounting in the FMCG category to protect bill size and growing footfall/store despite rising competition from quick commerce.

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Global and domestic brokerages remained largely unimpressed with DMart's Q3 show. JPMorgan cut its target to Rs 4,150 per share, noting that the profit came in below estimates as a result of higher-than-expected employee costs.

Morgan Stanley reiterated its 'underperform' call, noting that the management commentary in the recent quarters has raised doubts about DMart's growth outlook. It sees a 15 percent downside on shares, with a price target of Rs 3,260 apiece.

"We believe DMart’s margins would continue to be under pressure amid the high competition and management’s focus on market share," said Nuvama Institutional Equities. The brokerage cut its target price to Rs 4,212, from Rs 5,040 earlier, while keeping its 'hold' rating intact.

Motilal Oswal noted that while DMart’s value-focused model would co-exist with quick-commerce’s convenience model over the longer term, rising competition on pricing could weigh on DMart’s growth and margins in the near term. As a result, the broking house cut its target price on Avenue Supermarts shares to Rs 4,450, from Rs 4,750 earlier. However, it reiterated its 'buy' call on DMart's stock price.

DMart also announced that Neville Noronha will step down from the post of Managing Director and CEO after his current term which will end in January 2026. Anshul Asawa, an IIT Roorkee and IIM Lucknow alumnus, will be joining DMart after a 30-year long stint at Unilever, said Avenue Supermarts Ltd in the exchange filing.

JPMorgan said the news of the appointment of Anshul Asawa as the CEO desginate was an important development. Global brokerage Bernstein said the announcement was 'unexpected', but maintained its bullish view on the retail player.

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