Avenue Supermarts, the company that owns and operates the DMart chain of stores, saw its shares slip 5 percent on Tuesday after it warned of a sharp fall in profitability this financial year. Analysts have also cut their earnings estimates on the company in view of its April sales declining 45 percent post-COVID-19 lockdown.
Avenue Supermarts' share price slipped 5 percent to Rs 2,278.40 per share on the NSE.
In its earnings announcement on Saturday,
the company's management said that it expects significantly large EBITDA declines on the back of lower sales, higher cost of operations, lower gross margins and higher personal hygiene/store sanitization costs.
New store openings will be impacted as construction activity will commence with some lag depending on availability of labour and material and the onset of monsoon mid-June onwards in most parts of the country, it further added.
In its Q4 earnings, the company reported a revenue increase of 23 percent YoY and a net profit jump of 41 percent YoY to Rs 271 crore. The company has witnessed a 45 percent decline in its April revenue, as more than half of its stores remained closed during the lockdown.
Brokerages remain downbeat on Avenue Supermarts' performance trajectory in the near future.
Prabhudas Lilladher has cut the FY21 and FY22 earnings per share estimate by 16.8 percent and 8.1 percent respectively.
Credit Suisse has cut the company's earnings estimate by 3-9 percent, and placed a 'neutral' rating on the stock with a target price of Rs 2,150.
Meanwhile, Motilal Oswal has maintained a 'sell' call on D-Mart with a target price of Rs 1,900 and said retail companies are expected to see revenue erosion.
We cut our FY21 EBITDA by 17 percent but retain our estimates for FY22. We raise our target multiple on EV/EBITDA to 40 times from 35 times and arrive at a target price of Rs 1,900 from the current price, which still implies a 21 percent downside," said Motilal.
HDFC Securities also has a 'sell' call on the stock as it expects D-Mart's gross margin and EBITDA margin to remain under pressure as the essentials remain high in revenue mix till June-end.
It has cut D-Mart's FY21 EPS by 11 percent to factor in lower gross margins.
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