 "DMart share falls 5% despite strong Q2 business update; adds 377 stores")
DMart share price: Shares of Avenue Supermarts (DMart) fell as much as 4.95 per cent to hit an intraday low of Rs 4,695.40 per share on Friday.
DMart share price fell despite the company posting strong quarterly numbers for Q2 FY25 (July–September).
DMart financial performance
In Q2 FY25, the company’s standalone revenue from operations came in at Rs 14,050.32 crore, an increase of over 14 per cent from Rs 12,307.72 crore in the same quarter of FY24.
DMart posted revenues of Rs 10,384.66 crore in Q2 FY23 and Rs 7,649.64 in Q2 FY22. The total number of stores as of September 30, 2024, stood at 377.
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DMart’s profit rose 17.5 per cent year-on-year (Y-o-Y) to Rs 773.7 crore during the June quarter of FY25 (Q1 FY25), backed by improvement in sales from general merchandise and apparels. The company had posted a net profit of Rs 658.7 crore in April-June a year ago (Q1 FY24).
The supermarket chain operator’s revenue from operations had soared nearly 19 per cent Y-o-Y to Rs 14,069.1 crore in Q1 of FY25. This is against Rs 11,865.4 crore in Q1 FY24.
Total expenses in the June quarter rose 18.6 per cent to Rs 13,056.61 crore. Meanwhile, the total income surged 18.5 per cent Y-o-Y to Rs 14,110.74 crore.
What do brokerages say?
International brokerage Citi has assigned a 'sell' rating to DMart, setting a target price of Rs 3,350 per share.
The firm noted that throughput is being negatively affected by an unfavourable product mix and recent store additions, with six new locations opened during the quarter.
Citi further remains cautious about the current valuation, citing risks related to store expansions and earnings.
Goldman Sachs also maintained a 'sell' rating, with a target price of Rs 4,050.
Analysts at Goldman Sachs pointed out a major slowdown in growth, likely due to the rise of quick commerce (Q-commerce).
In contrast, Morgan Stanley held an 'overweight' rating on DMart, with a target price of Rs 5,769.
It observed that while Q2 standalone revenue fell short of estimates, operational metrics showed improvement, albeit at a slower pace.
The unexpectedly weaker growth trend has led analysts to seek further insights from the management during the upcoming Q2 results.
Macquarie, meanwhile, continued to rate DMart as 'outperform' and has set a target price of Rs 5,600.
DMart background
Avenue Supermarts operates the DMart chain of supermarkets, which offers a wide array of home and personal products.
Each DMart store stocks a comprehensive range of items including groceries, toiletries, beauty products, clothing, kitchenware, bedding and home appliances, among others.
DMart share price history
DMart shares have risen over 1.5 per cent in the past six months. However, the scrip rallied over 16 per cent this calendar year-to-date (YTD).
The 52-week range of DMart share price is Rs 3,618.85-5,484.
The market capitalisation of DMart is Rs 3.08 trillion, according to BSE. The company falls under the BSE 100 category.