The stock price of DMart retail chain operator Avenue Supermarts Ltd rallied more than 5 percent to a 52-week high of Rs 3,130.05 apiece on Monday after the company reported decent growth in the December quarter earnings.
Avenue Supermarts reported a rise of 16.4 percent in its consolidated net profit at Rs 446.95 crore for the third quarter of fiscal 2021. The company had posted a net profit of Rs 384.01 crore in the October-December quarter a year ago.
The company's revenue from operations during Q3FY21 increased 10.77 percent to Rs 7,542 crore as against Rs 6,808.93 crore, YoY.
D-Mart's Q3 profit rises 16.4% to Rs 447 crore, revenue up 10.8% to Rs 7,542 crore
EBITDA rose 15.5 percent to Rs 689 crore as compared to Rs 597 crore, while EBITDA margin expanded by 30 bps to 9.1 percent from 8.8 percent, YoY.
"The quarter has seen further improvement in our business and financial metrics. Our overall sales and sales mix is now trending very close to our usual times except for specific customer consumption changes post COVID-19. Apparel, laundry, footwear, travel and such relevant out of home usage categories are taking more time to recover," said Neville Noronha, CEO & Managing Director, Avenue Supermarts.
However, December month did not trend as well as the festival months of October and November. Two years and older D-Mart stores did 96 percent of December 2019 sales in the month of December 2020. We have 162 stores that are 2 years or older, he added.
Global research house Credit Suisse maintained an 'Underperform' rating on the stock on stretched valuations. It is of the view that the company faces long-term risks of disruption from e-commerce.
The brokerage raised the target price to Rs 2,400 per share from Rs 1,900 per share earlier.
Jefferies downgraded the stock to 'hold' from 'buy' but also raised the target price to Rs 3,200 from Rs 2,600 per share.
The brokerage believes that DMart managed to beat consensus, led by a better margin in Q3. The trend looks strong QoQ as the recovery is underway, it said. The outlook is cautious due to restrictions in some areas and supply chain issues.
Yes Securities said that after the recent outperformance, the stock is currently trading at 68x FY23E P/E and 45x EV/EBITDA.
"While we turned positive on the stock around Rs 2,000 levels citing favorable multiples, increasing traction in online business and strong balance sheet advantages, those advantages seem to be broadly captured in current valuations around Rs 3,000 levels. We, therefore, expect a period of consolidation in the stock with investors waiting to see the impact of aggressive online competition in the grocery space," Himanshu Nayyar, Lead Analyst – Institutional Equities, Yes Securities said.
The domestic brokerage house expects DMart's management to aggressively expand both its offline and online footprint over the next two years utilizing its strong balance sheet, which should provide strong earnings visibility and thereby sustain these premium multiples.
At 10:15 am, the shares of Avenue Supermarts were trading 2.86 percent higher at Rs 3,052.55 apiece on the BSE as compared to a 0.72 percent gain in the benchmark Sensex.
(Edited by : Ajay Vaishnav)