Avenue Supermarts share price touched a 52-week high of Rs 3,137, adding 5 percent in the early trade on January 11 after the company reported a 16.4 percent year-on-year growth in consolidated profit for the quarter ended December 2020
The operator of hypermarket retail chain D-Mart saw its profit increase to Rs 446.97 crore during the quarter compared to Rs 384.04 crore in the same period last year. The sequential growth in the bottom line was at 125.1 percent.
Revenue from operations rose 10.8 percent year-on-year to Rs 7,542 crore in October-December, while the quarter-on-quarter growth was 42.1 percent.
Here is what brokerages have to say on the stock and the company after the Q3 numbers:
Prabhudas Lilladher
Prabhudas Lilladher has retained "buy" and increased the target price to Rs 3,296 from Rs 2,316 despite a 52 percent appreciation since the upgrade in October. As post-COVID-19 recovery catches up, the company seems to be gaining confidence on expansion of D’Mart Ready with launch in Ahmedabad, Bengaluru and Hyderabad, allocation of store space for operations and extending D’Mart Ready to general merchandise (home furnishings, small electrical and kitchen aids) and fruits and veggies.
The third quarter results were strongly driven by a surge in festival shopping, resulting in a beat across EBITDA/PAT. The worst seems to be over, though the near-term outlook remains mixed due to disruption following night curfew and weekend closure in certain cities, supply issues in non FMCG goods and mix impact as apparel, laundry, footwear and travel segments remain hit.
However, the long-term story is getting better with 1) increasing focus on Ecom, which can provide further scale to already existing supply chain 2) everyday value focus and 3) expectations of D’Mart doubling stores over FY20-25. We estimate 29.8% PAT CAGR over FY20-23 and 28.9% over FY20-25, as we increase EPS between 4.9-5.7% over FY21 to 23 and 2.9% for FY21/22/23.
Dolat Capital
D'Mart reported a healthy recovery with revenue/EBITDA/APAT growth of 10.1/16.6/19.3% YoY. 11/52bps gross/EBITDA margin expansion YoY is enticing despite estimated inferior mix. Meagre one store additions (lowest in 14 quarters) was a key negative. D'Mart’s increased focus on online (D'Mart Ready) is positive. Inevitable strategic shift by D'Mart to online is positive in our view, given the pace of e-commerce growth.
That said, in the near term, online shift may impact store/area expansion and thus the growth of B&M stores. Simultaneously, online may take longer to deliver growth and may even pull down earnings. In this backdrop, D'Mart's recent run-up of 44/63% in 3M/52-week low and rich valuation at 93/74x FY22/23E standalone EPS leaves limited room to err. "Sell" with revised target price of Rs 2,668 at 70x (vs 60x earlier) Dec-22E EPS. The increase in target multiple is to factor strategic shift, business recovery/healthy margin and broader market re-rating.
Credit Suisse
The research house maintained underperform call on stretched valuations but raised target to Rs 2,400 from Rs 1,900 per share. It has increased FY21-23 earnings estimates by 11-12 percent.
The company faces long-term risks of disruption from e-commerce, reported CNBC-TV18.
Jefferies
Jefferies downgraded the stock to "hold "from "buy" and raised the target to Rs 3,200 from Rs 2,600. D'Mart managed to beat consensus, led by better margin in Q3. The trend looks strong QoQ as the recovery is underway.
D'Mart added one store but expanded the e-commerce pilot into three more cities. The outlook is cautious due to restrictions in some areas and supply chain issues, reported CNBC-TV18.
