Avenue Supermarts share hits six-month low 

NEW DELHI:  Avenue Supermarts share prices hit a fresh six-month low after its December quarter net profit came below street estimate due to weak demand and shrinkage of margin. The stock had hit an intraday low of Rs 3,627 on Monday and later closed the session at 3,679 on the BSE, down 5%.

The owner of D-Mart chain of retail stores reported a 6.6% year-on-year rise in consolidated profit at Rs 590 crore.  Analysts, at large, expected the firm to report a profit of about Rs 650 crore. Its EBITDA margin fell to 8.34% in Q3 from 9.39% in the year ago quarter. “D-Mart’s unit economics remains sub-optimal vis-à-vis the pre-pandemic days (partly attributable to the step-up in store additions/size).  

While we factor in recovery over FY22-24, this assumption stands at risk, given heightened competitive intensity from deep-pocketed retailers,” said Reliance Securities in a note.  The brokerage maintains a SELL on D-Mart, with a discounted cash flow-based target price (TP) of Rs 3,000 /share.

Analysts at JM Financial noted D-Mart’s Q3 earnings were lacklustre and below an already toned-down expectation. “Normalised per-store sales growth (3-yr CAGR) remained muted (2% p.a.) as seen over the past few quarters as well.

The pain-points in terms of lower throughput from newer stores in the network plus inflationary stress and weak consumer sentiments impacting discretionary categories’ offtakes continued to impact stores’ throughput and mix and consequently, profitability.”