Radhakishan Damani's DMart Tanks 6% After Unimpressive Q3 Results; Buy, Sell or Hold?

DMart Shares Today: Radhakishan Damani’s DMart or Avenue Supermarts share price today hit 6 month low of Rs 3,645 apiece on NSE. The owner and operator of DMart chain of retail stores reported a 6.6 percent rise in consolidated post-tax profit at Rs 590 crore for the quarter ended December 2022 as against Rs 553 crore a year back. Analysts had forecast net profit of Rs 646.5 crore.

Total revenue for Avenue Supermarts for the October-December quarter stood at Rs 11,569 crore, as against Rs 9,218 crore last year, the company said in a stock exchange filing on January 14, indicating a 25.5 per cent on-year growth.

Earnings before interest, tax, depreciation and amortization (EBITDA) for the company during the period under review came in at Rs 965 crore, as against Rs 866 crore in the corresponding quarter last year, up by 11.4 per cent. EBITDA margin, however, declined to 8.3 per cent from 9.4 per cent.

What Should Investors Do Now?

Speaking on the reason for the slump in Avenue Supermarts share price, Ravi Singhal, CEO at GCL Securities said, “Radhakishan Damani’s Avenue Supermarts share price has been under pressure as its Q3 results have come below market expectations, especially on the margin front. Hence, the stock is under sell-off heat since early morning deals on Monday. However, high-risk traders can buy around ₹3600 for near term target of Rs 3,800 apiece levels maintaining stop loss at Rs 3,500 levels.”

Prabhudas Lilladher has cut the EPS estimates of D’Mart by 4.2 per cent/4.3 per cent/4.0 per cent for FY23/24/25 and the target price to Rs 4,675 (Rs 4854 earlier) following disappointing margin performance in 3Q23 (106 bps YoY EBIDTA margin decline to 8.3 per cent).

“Mix deterioration due to tepid growth in Apparel and general merchandise impacted margins. Any meaningful correction can be used as a good entry point. Retain Buy,” it said.

Motilal Oswal maintained ‘neutral’ rating on the stock with a target price of Rs 4,050, given its expensive valuation. The recovery of revenue per store indicates that DMart has surpassed the pre-Covid level; however, a nearly 20 per cent higher average store size and weak demand in the non-food category affected revenue per sq ft.

Broking house reduced its FY23E store additions to 40 from 45 earlier and trimmed FY23/24 PAT by 8 per cent/3 per cent, resulting in an EBITDA/PAT CAGR of 28 per cent/26 per cent over FY23-25.

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