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.
DMart reported a standalone revenue from operations at Rs 15,565.23 crore, higher by 17.5 percent on-year compared to Rs 13,247 crore in the same period a year-ago. The total number of stores as of December 31, 2024 stood at 387.
At 9.20 am, Avenue Supermarts stock price surged ten percent to quote Rs 3,972.2 on the NSE.
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International brokerage Macquarie and Morgan Stanley maintained their bearish views on the stock, especially as the growth trend remains well below the historical 20 percent top-line growth for the business and weak growth continues.
Morgan Stanley did add that standalone Q3 revenue was one percent higher than its expectations, and the growth was led by an average 12 percent increase in store count. The implied same store sales growth (SSSG) was around 5.5 percent, compared to its estimate of around four percent. The brokerage reiterated its target price on DMart shares at Rs 3,702 apiece, indicating an upside of four percent.
Macquarie raised concerns regarding competitive headwinds from quick commerce, which is weighing on growth momentum. Further, the third quarter typically sees a sequential pickup in gross margin given better product mix. DMart's 10-store additions were in-line with its estimates.
On the flip side, Hong Kong-based CLSA was bullish on Avenue Supermarts, maintaining its outperform call, with a target price of Rs 5,360 per share, which indicates a whopping 50 percent upside.
The brokerage noted that the standalone revenues came above its estimates, leading to optimism. CLSA had also said in December that it is bullish on DMart given its pivot to private labels, placing it well to meet competition. Private labels are brands owned and sold exclusively by the owner of the retail store.
In Q2FY25, the retail major's net profit rose 5.8 percent on-year, reaching Rs 659.6 crore, compared to Rs 623.6 crore in the same period last year. For the quarter, Avenue Supermarts revenue rose by 14.4 percent YoY to Rs 14,444.5 crore, up from Rs 12,624.4 crore year-on-year.
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