DMart Shares Rise 15% After Q3 Revenue Surges 17% To Rs 15,565 Crore; Should You Buy? – News18
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Shares of Avenue Supermarts Ltd., the parent company of DMart, surged 10% on Friday, January 3; Should you buy, sell or hold?
DMart shares locked at 10% upper circuit
Share of Avenue Supermarts, the operator of retail giant DMart, surged 15% to their day’s high of Rs 4,153 on the BSE today, following the announcement of a 17% year-on-year (YoY) increase in standalone revenue for the quarter ended December 31, 2024.
The company reported a revenue of Rs 15,565.23 crore for the third quarter, up from Rs 13,247.33 crore in the same period last year. These updates were shared on January 2, after market hours.
As of December 31, 2024, DMart operated 387 stores.
The company’s announcement came after market hours on Thursday in compliance with regulatory requirements. Avenue Supermarts shares ended Thursday’s session at Rs 3,615.30 on the NSE, marking a gain of Rs 54.30 or 1.52% from the previous day’s close. However, over the past 12 months, DMart shares have underperformed the market, falling by 12%, while the Nifty index gained nearly 12% during the same period.
The correction in the stock has brought its price below the 50-day and 200-day simple moving averages (SMAs) of Rs 3,753 and Rs 4,521, respectively.
Momentum indicators like RSI and MFI indicated that the stock is trading within a medium range of 46 and 49, respectively, according to data from Trendlyne. The stock has shown low volatility, with its 1-year beta standing at 0.3.
Should You Buy?
Global brokerage firm CLSA has an ‘Outperform’ rating on Avenue Supermarts, with a price target of Rs 5,360 per share. This target suggests a potential upside of 48% from Thursday’s closing levels.
Morgan Stanley, however, has an ‘Underweight’ recommendation with a price target of Rs 3,702 per share, citing continued weak growth trends.
The brokerage noted that the standalone Q3 revenue of Rs 15,570 crore, up 17.5% year-on-year, was 1% above expectations. The growth was driven by a 12% average increase in store count and same-store sales growth. While the sequential growth trend improved, the company remains well below its historical 20% topline growth rate.
On the flip side, Goldman Sachs has a ‘Sell’ rating on Avenue Supermarts, with a price target of Rs 3,425 per share, implying a potential downside of 5% from the last closing levels. The brokerage noted that while third-quarter growth showed improvement, margins will be closely watched due to increased discounting. Goldman Sachs also highlighted the impact of the rapid rise of quick-commerce players, which is expected to negatively affect Avenue’s growth.
Similarly, Citi has a ‘Sell’ rating on the stock, with a target price of Rs 3,500 per share. Citi’s note mentioned that revenue per store saw a 2.7% five-year CAGR, with same-store sales growth (SSG) impacted by increased competition from quick commerce and store additions in smaller towns. The brokerage expressed concerns about lower throughput and adverse product mix affecting gross margins.
Out of the 29 analysts covering Avenue Supermarts, 11 have a ‘Sell’ rating, nine recommend a ‘Buy’, and the remaining nine suggest a ‘Hold’.