Shares of Avenue Supermarts Ltd., the operator of retail chain DMart, surged over 14% in early trade on Friday after the company shared a positive business update for the October-December period of FY2024-25.
The stock, which closed at Rs 3,617.75 in the previous session, rose to a high of Rs 4,165.00 during intraday trading. Despite this strong performance, the stock remains far below its 52-week high of Rs 5,484.00, recorded on 24 September 2024. At the time of writing, DMart’s market capitalisation stood at Rs 2,66,800.56 crore and the shares were trading at Rs 4,134, up 14.27%.
DMart reported standalone revenue from operations of Rs 15,565.23 crore for the December quarter, reflecting a 17.5% year-on-year growth compared to Rs 13,247 crore in the same period last year. The company’s total store count stood at 387 as of 31 December 2024, marking an increase in its retail presence.
By 9:20 am, Avenue Supermarts’ stock price was up 10% at Rs 3,972.2 on the National Stock Exchange (NSE).
BROKERAGE VIEWS
The revenue growth has drawn mixed reactions from brokerage firms, with some maintaining cautious outlooks while others remain optimistic.
Morgan Stanley retained its bearish view, pointing out that the growth rate is below DMart’s historical 20% top-line growth. However, the brokerage acknowledged that standalone Q3 revenue was 1% higher than its expectations. The growth was attributed to a 12% increase in store count, while the implied same-store sales growth (SSSG) was around 5.5%, exceeding its estimate of 4%. Morgan Stanley reiterated a target price of Rs 3,702 per share, indicating a modest upside of 4%.
Macquarie echoed concerns about competitive pressures from the quick commerce sector, which it believes are weighing on DMart’s growth. The brokerage also noted that Q3 typically sees an improvement in gross margins due to a better product mix. While DMart’s addition of 10 stores during the quarter was in line with estimates, Macquarie continues to adopt a cautious stance.
On the other hand, Hong Kong-based CLSA remains optimistic about Avenue Supermarts’ performance. The brokerage has maintained its “outperform” rating, with a target price of Rs 5,360 per share, suggesting a 50% upside. CLSA highlighted that DMart’s standalone revenue exceeded its expectations and reiterated confidence in the company’s strategy of focusing on private labels. These in-house brands are seen as a key factor in countering competition and boosting profitability.
In Q2FY25, Avenue Supermarts reported a net profit of Rs 659.6 crore, a 5.8% increase compared to Rs 623.6 crore in the same quarter last year. Revenue for the quarter rose 14.4% year-on-year to Rs 14,444.5 crore, up from Rs 12,624.4 crore.