DMart share price gains more than 4% after Avenue Supermarts post in line Q1 results. Should you Buy, Sell or Hold?

Stock Market Today: Avenue Supermarts Ltd or DMart share price gained more than 4% in opening trades on Monday post Q1 results were posted by the company over the weekend.

DMart share price opened at ₹5,126.45, about 3.69% higher than previous close of ₹4,943.65. DMart Share price thereafter gained 4.4% to highs of ₹5164 on the NSE on Monday.

Q1 performance meets analysts expectations

DMart, that had announced its April-June 2024 quarter results on Saturday, July 13, had reported a rise of 17.5 per cent rise in consolidated net profit to ₹773.8 crore, compared to ₹658.8 crore in the corresponding period last year.

The hypermarket chain operator's operating revenue increased 18.6% to ₹14,069 crore in the first quarter of the current fiscal year from ₹11,865.4 crore in the same period last year.

The standalone Earnings Before interest tax depreciation and amortisation (Ebitda) grew 18% year on year to Rs1220 crore , which analysts said was inline with consensus estimates. Analysts at Jefferies India Pvt Ltd in their post result report said that Ebitda was in line iwth their estimates. The Revenue growth was healthy at 18% YoY, on the back of store adds and low-double-digit SSG as estimated.

Key takeaways

Though SSG (same-store-sales-growth) was slightly soft analyst attribute the same to recent larger store additions (about 20% increase in average store size), as well as the lackluster demand for discretionary goods (percentage of discretionary items decreased to 22% in FY24 compared 27% in FY20). However DMart was able to maintain the Ebitda, which as per analysts at Motilal Oswal Financial Services was positive.

Analysts at Nuvama also highlighted DMart’s Q1FY25 gross margin improved driven by the rise in contribution of General Merchandise & Apparel (GM&A), which is a positive, but was negated by increasing investments towards improving service levels and building capability for the future. Store productivity remains below pre-covid average. Addition of six stores this quarter is higher than same quarter last year.

Analysts Recommendations

Analysts at Jefferies added that they believe that the worst is behind when it comes to store additions and mix . However valuation at 90 times one year forward price to earnings is at a steep premium to peers and prices in a lot of good news. They thereby have slightly tweaked their FY25-27 earnings estimates and maintain Hold with a slightly higher target price of Rs4,600

Motilal Oswal Financial Services maintains their FY25 and FY26 estimates and factor in a CAGR (compound annual growth rate) of 22% and 31% in revenue and net profit over FY24-26, aided by 11% and 9% growth in footprints and revenue productivity. On Valuations they assign a 52 times Enterprise Value by Ebitda multiple (83 times price to earnings ) on FY26 estimates basis to arrive at a target price of ₹5,500

Analysts at Nuvama Institutional Equities have tweaked revenue for FY25 and 26 by 1% and 3% respectively. They have rolled forward Q1FY27 estimated earnings and valuing the company at 75 times price to earnings arrive at a target price of ₹5,091. They maintain Hold ratings.

With steady operating performance analysts at Centrum Stock Broking however have increased earnings for FY25 and FY26 by 5.7% and 5.1% respectively. They have retained ADD rating with revised target price of Rs5,428 (implying 75 times FY26 estimated earnings per share).

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