What should investors do with Avenue Supermarts post Q1 results: buy, sell or hold?

The standalone revenue from operations at Rs 5,031.75 crore in Q1FY22 grew by 31.3 percent compared to year-ago quarter.

Moneycontrol News
July 12, 2021 / 09:32 AM IST
 
 
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Avenue Supermarts share price fell 2 percent in early trade on July 12 after the company reported its June quarter earnings.

The company on July 10 reported a massive 132.3 percent year-on-year increase in standalone profit at Rs 115.13 crore, driven by a low base in the year-ago period, but impacted by restrictions on the number of hours of store operations due to the second wave of Covid-19.

The standalone revenue from operations at Rs 5,031.75 crore in Q1 FY22 grew by 31.3 percent compared to the year-ago quarter, said the company in its BSE filing.

Here is what brokerages have to say about the stock and the company post Q1 earnings:

Citi | Rating: Sell | Target: Rs 2,210

The brokerage house has maintained a buy call on the stock on the back of weak Q1 results, which lead to trimming of consensus estimates by another 8% for the full year.

Morgan Stanley | Rating: Downgrade to equal-weight | Target: Rs 3,268

Morgan Stanley has downgraded the stock to equal-weight as the Q1 earnings missed its & consensus estimates. It will await a better entry point due to lack of near-term triggers.

Goldman Sachs | Rating: Buy | Target: Rs 3,690

The company’s results were below expectations on the back of a lower gross margin. The broking house lowered its FY22 EPS estimates by 7.9% to reflect a lower margin in Q1. It feels that the margin impact will be one-off as a consequence of COVID restrictions.

Jefferies | Rating: Underperform | Target: Rs 2,300

Broking house kept underperform rating as the company reported a 22-quarter low gross margin of 12.4 percent, however, the revenue growth benefited due to low base.

The store needs 45 days of unhindered operational time to get back to pre-Covid level.

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Prabhudas Lilladher | Rating: Buy | Target: Rs 3,686

Despite near term challenges we remain optimistic about the long term potential of D’Mart on back of 1) increasing scale and scope DMart Ready 2) extending offerings on DMart ready app to include general merchandise, fresh food and vegetable 3) growth in general merchandise sales over the lower base, 4) everyday low value focus and 5) steady store expansion plans.

We believe bill cuts/store/day will normalize once the lockdown related restrictions minimize however the bill value is expected to remain higher than pre covid levels due to the inflationary environment.

Motilal Oswal | Rating: Neutral | Target: Rs 3,220

We expect DMART to deliver FY20-23E revenue/PAT CAGR of 24% each, factoring in 30/40 store additions and 50% SSSG in FY22E/FY23E. Unlike other retailers, grocery retailers like DMart have seen a swift recovery once COVID related restrictions were lifted and a healthy margin improvement.

Expensive valuations; risk of a moderation in growth, owing to strong traction for online retailers in a post-COVID world; and the presence of deep pocket players like Amazon and Reliance Retail restricts the near-term upside.

At 09:16 hrs, Avenue Supermarts was quoting at Rs 3,327.25, down Rs 51.70, or 1.53 percent on the BSE.

The share touched a 52-week high of Rs 3,425 and a 52-week low of Rs 1,900 on 06 July, 2021 and 20 July, 2020, respectively.

Currently, it is trading 2.85 percent below its 52-week high and 75.12 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
Tags: #Avenue Supermarts #Buzzing Stocks
first published: Jul 12, 2021 09:27 am