Avenue Supermarts shares fall 2% despite strong Q2FY23 earnings

Consolidated revenue came in higher at Rs 10,638 crore for the quarter, an increase of 36 percent compared to Rs 7,789 crore in September 2021 quarter.

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Shares of Avenue Supermarts declined 2 percent intraday on October 17, even though company reported strong numbers for the quarter ended September 2022.

The operator of DMart chain of retail stores reported a 64 percent rise in consolidated post-tax profit of Rs 685 crore for the quarter ended September 2022 as against Rs 418 crore in the same quarter of the previous fiscal year.

Sequentially, the profit rose 6.6 percent from Rs 642 crore in Q1FY23.

Consolidated revenue came in at Rs 10,638 crore for the quarter, an increase of 36 percent compared to Rs 7,789 crore in the year ago period. Sequentially, the revenue rose 6 percent from Rs 10,038 crore in the June quarter.

EBITDA margin for the Q2FY23 stood at 8.4 percent as compared to 8.6 percent in Q2FY22.

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Here is what brokerages have to say about stock and the company post June quarter earnings

Prabhudas Lilladher

We remain confident of the long-term growth story of D’Mart led by aggressive store expansion and strong demand recovery in the coming festive season. Hence, we retain our “Buy” rating.

We estimate 39% YoY PAT growth for the 2nd half of FY23 and 42% PAT CAGR over FY22-25. We believe D’Mart has a huge runway to grow with 1500+ store potential (current stores 302) in a consolidated market of modern retail trade, gradual scale up in D’Mart Ready and increase in share of general merchandise and apparel segment. We retain BUY with DCF based target price of Rs5,121.

Motilal Oswal

We are cognizant of the prominence of new-age grocery models, their rich valuations, and soft management commentary on the non-food category as well as lower revenue per sq. ft. in the last few quarters.

Subsequently, we value the company at 50x EV/EBITDA on FY24E basis and maintain our Neutral rating on DMART with a Target Price of Rs 4,100, given its expensive valuation.

Morgan Stanley

We kept overweight rating on the stock with a target at Rs 4,590 per share.

The Q2 EBITDA was below estimate due to weaker product mix.

The strong topline with good LFL with continued expansion of DMart ready, are positives, reported CNBC-TV18.

At 09:51 hrs Avenue Supermarts was quoting at Rs 4,227.05, down Rs 76.20, or 1.77 percent on the BSE.

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