DMart’s Q1 show in-line with expectations, brokerages retain optimism

Nuvama Institutional Equities maintained its ‘hold’ call on the player, but said it was factoring in a gradual uptick in store productivity.

DMart parent Avenue Supermarts reported its earnings for the first quarter of the current fiscal year, with the net profit and revenue coming in-line with expectations. The Street cheered the Q1 show as DMart shares surged over two percent in early trade on July 15.

However, the results did not prompt any major changes from brokerages, who largely maintained their ratings on the supermarket operator.

Avenue Supermarts posted a consolidated net profit of Rs 773.8 crore for the first quarter of the financial year 2024-25, up 17.5 percent from Rs 658.8 crore in the year-ago period. According to a Moneycontrol poll, net profit was likely to come in at Rs 798 crore.

The company reported an 18.6 percent YoY rise in consolidated revenue from operations at Rs 14,069.1 crore against Rs 11,865.4 crore a year ago. Ahead of the results show, the DMart parent was expected to record a 17.5 percent on-year rise in revenue to Rs 13,938 crore.

At 9.20 am, DMart shares were quoting Rs 5,045.95 on the NSE, higher by 2.1 percent compared to the previous session's close.

The positive surprise in Avenue Supermarts’ Q1 show was the improving gross margins, led by the General Merchandise & Apparel. However, the positive contribution from GM&A was impacted by rising costs, including increasing investments towards improving service levels and building capability for the future.

Also Read | DMart Q1 results: Net profit rises 17.5% to Rs 773.8 crore; revenue up 18.6%

CLSA concurred with the importance of store additions, saying that the two key focus areas for investors should be store additions and the growth in gross profits. The brokerage decided to keep its outperform call intact, with a target of Rs 5,535 apiece.

“Sustained high-teen revenue and delivery of earnings growth makes DMart the best growth engine amongst discretionary names,” said JPMorgan, who reiterated its ‘overweight’ rating. The brokerage has a price target of Rs 5,400 per share.

The store-productivity remained under pre-Covid levels. Nuvama Institutional Equities maintained its ‘hold’ call on the player, but said it was factoring in a gradual uptick in store productivity. Therefore, the brokerage raised the target price on Avenue Supermarts to Rs 5,091 apiece, higher from Rs 4,821 per share.

Foreign brokerage Jefferies retained its ‘hold’ call as well, saying while the mix continued to improve, expectations for the quarter were high as a result of the new store openings. The brokerage has a target of Rs 4,600 per share.

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