Avenue Supermarts Stock Check: 218 per cent gain in 5 years, but is now the right time buy DMart shares?

After a remarkable multi-bagger rally over the long term, shares of Avenue Supermarts (DMart) have seen some moderation in their upward trajectory in recent times. Over the past five years, the stock has surged by over 218 per cent, climbing from ₹1,571.15 in August 2019 to its current trading level of ₹5,000. However, 2024 has been a mixed bag for the stock. Year-to-date, DMart shares have risen 22.5 per cent, with a notable 35 per cent increase over the past year.

The stock added over 1 per cent in August, extending its gains for the third consecutive month. It saw a 4.6 per cent rise in July and a 9.6 per cent increase in June, despite a 6.5 per cent dip in May. From February to April, the stock remained positive, with gains of 1.7 per cent in April, 15.5 per cent in March, and 3.33 per cent in February. January was the only month of decline this year, with the stock falling 7.1 per cent.

In June, the stock reached a record high of ₹5,220 but has since pulled back by over 4 per cent to its current level. Despite this, it remains more than 38 per cent above its 52-week low of ₹3,617.30, recorded in October last year.

With such a substantial rally behind it, the key question for investors is whether this upward momentum will continue. Technical and fundamental experts are weighing in on whether now is the right time to consider buying the stock.

Earnings

Avenue Supermarts reported a consolidated net profit of ₹773.8 crore for the first quarter of 2024-25, marking a 17.5 per cent increase from ₹658.8 crore in the same period last year. The company's consolidated revenue from operations also saw a year-on-year rise of 18.6 per cent, reaching ₹14,069.1 crore, up from ₹11,865.4 crore.

A key quarter highlight was the improvement in gross margins, driven by the General Merchandise & Apparel (GM&A) segment. However, this positive impact was partially offset by rising costs, including increased investments to enhance service levels and build future capabilities.

Technical View

Om Mehra, Technical Analyst, SAMCO Securities

Avenue Supermarts Ltd (D-Mart) has been consolidating within a range, finding support around the ₹4,600 level and facing resistance near ₹5,200. Despite this consolidation phase, the primary trend remains positive. Currently, the stock is trading above its 100-day and 200-day moving averages but is below its 20-day and 50-day moving averages.

After reaching a 52-week high, the Nifty FMCG index has remained muted over the past few days. This period of consolidation is likely to persist, which is healthy for sustaining the broader trend. Meanwhile, daily volumes for D-Mart have remained average during this consolidation phase, and the daily RSI is at 47, indicating a neutral momentum.

Upon breaking the immediate resistance at ₹5,050, the stock will likely display strength. In this consolidation phase, D-Mart can accumulate in tranches for the long term, with potential targets in the ₹5,500- ₹5,600 range.

Rajesh Palviya, SVP at Axis Securities

The stock shows an upward trend in the short and medium term, with a pattern of higher tops and bottoms. It is also trading above its 20, 50, 100, and 200-day SMA, and these averages are inching up along with the stock price, indicating bullish sentiment. The current price level is approaching a significant breakout point at 5230, and a sustained move above this level could lead to a breakout. In this case, the stock may continue its momentum towards the 5900-6100 levels. The stock forms a "rounding bottom" pattern on the monthly chart, indicating increasing strength. The crucial support levels are at 4800-4600, and any minor corrections to this range could present buying opportunities for investors.

Pravesh Gour, Senior Technical Analyst at Swastika Investmart

The counter has been trading within a range for some time, stuck between moving averages on the daily timeframe. A multi-month breakout is awaited in the weekly timeframe. In terms of technical levels, a significant hurdle lies at the 5200 mark; a breakout above this level could trigger a massive bull run towards the 5600 and 6000 levels in the short term. On the downside, support is placed at the 4800 mark, where the 100 DMA is located. A breakdown below this level could lead to weakness towards the 4600 level.

Fundamental View

According to reports, recently, CLSA raised its target price for Avenue Supermarts (DMart) from ₹5,535 to ₹5,650 while maintaining an 'Outperform' rating. The new target implies an upside potential of 13 per cent.

Analysts at CLSA expressed a positive outlook on DMart, highlighting its position as a long-term cost leader in Indian retail. The revised target price comes after analysing DMart's FY24 annual report, underscoring the company's growing focus on sustainability. CLSA noted that DMart has made significant strides in enhancing its environmental and social metrics, including an increased use of solar energy and the acquisition of more green building certifications, leading to reduced power expenses.

On the social front, DMart has ramped up its hiring of permanent female employees and maintains a high proportion of female contract workers. Additionally, the company is now paying a greater percentage of its workforce above the minimum wage compared to FY23, further demonstrating its commitment to social responsibility, stated the brokerage.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.