Should investors buy, sell or hold Avenue Supermarts post Q1 results?

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Morgan Stanley has downgraded Avenue Supermarts' stock to equal-weight as the Q1 earnings missed its and consensus estimates. It will await a better entry point due to the lack of near-term triggers.

Should investors buy, sell or hold Avenue Supermarts post Q1 results?
Shares of Avenue Supermarts declined over two percent in early trade on Monday after the company reported its June quarter earnings.
The DMart retail chain operator Avenue Supermarts reported a standalone net profit of Rs 115.13 crore in Q1FY22, registering a jump of 132.3 percent driven by a low base in the year-ago period.
Total standalone revenue from operations during the quarter grew 31.3 percent on year to Rs 5,031.75 crore.
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Avenue Supermarts said it lost significantly more days or had higher restrictions on the number of hours of store operations compared to the same period last year.
Here’s what brokerages have to say on the company’s stock and Q1 earnings:
Morgan Stanley
Morgan Stanley has downgraded the stock to equal-weight as the Q1 earnings missed its and consensus estimates. It will await a better entry point due to the lack of near-term triggers.
The brokerage has a target price (TP) of Rs 3,268 per share.
Citi
Citi maintained a ‘sell’ rating on the stock with a TP of Rs 2,210 due to weak Q1 results, which led to trimming of consensus estimates by another eight percent for the full year.
Jefferies
Jefferies has an ‘underperform’ rating with a target of Rs 2,300.
The company surprised negatively with a 22-quarter low gross margin of 12.4 percent, however, the revenue growth benefited from a low base, Jefferies said.
It believes that the store needs 45 days of unhindered operational time to get back to the pre-Covid level.
Goldman Sachs
Goldman Sachs is of the view that the company’s results were below expectations on the back of a lower gross margin. It lowered its FY22 EPS estimates by 7.9 percent to reflect a lower margin in Q1. It feels that the margin impact will be a one-off as a consequence of COVID restrictions.
The brokerage has a ‘buy’ call with a target price of Rs 3,690 per share.

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