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Earnings Review: Should you buy, sell or hold DMart post Q3 results?

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Avenue Supermarts' revenue from operations during Q3FY21 increased 10.77 percent to Rs 7,542 crore as against Rs 6,808.93 crore, YoY. 

Earnings Review: Should you buy, sell or hold DMart post Q3 results?
The share price of Avenue Supermarts touched its 52-week high on Monday after the firm reported a 16.4 percent rise in year-on-year profit December 2020 quarter. It posted a profit of Rs 446.95 crore in Q3 as against Rs 384.01 crore in the year-ago quarter.
Avenue Supermarts' revenue from operations during Q3FY21 increased 10.77 percent to Rs 7,542 crore as against Rs 6,808.93 crore, YoY.  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.
Avenue Supermarts CEO and managing director Neville Noronha said there is further improvement in the company's business and financial metrics during this quarter helped by festive sales.
"Our overall sales and sales mix are 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, he added.
Here is what brokerages have to say on the stock and the company after the Q3 numbers:
Credit Suisse
The brokerage house maintained an 'underperform' rating on the stock on stretched valuations but raised its target to Rs 2,400 from Rs 1,900 per share. It also increased FY21-23 earnings estimates by 11-12 percent.
The company faces long-term risks of disruption from e-commerce, further added CS.
Jefferies
The brokerage downgraded the stock to 'hold' from 'buy' but raised its target price to Rs 3,200 from Rs 2,600. As per Jefferies, DMart managed to beat consensus, led by a better margin in Q3. The trend looks strong QoQ as the recovery is underway, it added.
"DMart added one store but expanded the e-commerce pilot into three more cities. The outlook is cautious due to restrictions in some areas and supply chain issues," Jefferies further stated.
Prabhudas Lilladher
The brokerage retained a "buy" call on the stock and increased its target price to Rs 3,296 from Rs 2,316. This comes despite a 52 percent jump since the upgrade in October.
"The third-quarter results were strongly driven by a surge in festival shopping, resulting in a beat across EBITDA/PAT. The worst seems to be over, though the near-term outlook remains mixed due to disruption following night curfew and weekend closure in certain cities," noted the brokerage.
It also increased EPS between 4.9-5.7 percent for FY21-23.
Dolat Capital
The brokerage has a 'sell' call on the stock with a target price raised to Rs 2,668 per share. The increase in target multiple is to factor strategic shift, business recovery/healthy margin and broader market re-rating, it added.
As per the brokerage, DMart reported a healthy recovery, however, store additions were the lowest in 14 quarters. DMart’s increased focus on online is positive, it said, adding that the inevitable strategic shift by DMart to online is positive given the pace of e-commerce growth.