DMart shares slip 3% after Goldman Sachs cuts target to Rs 3,425 per share

Avenue Supermarts, the parent company of DMart, shares lost 3 per cent in trade on Wednesday and logged an intraday low of Rs 3,699.65 per share on BSE. The selling pressure in the stock can be attributed to global brokerage Goldman Sachs cutting the target price on the stock, as per Bloomberg, to Rs 3,425 per share from Rs 4,050 per share while maintaining a 'Sell' rating. 

 

Around 11:36 AM, DMart share price was down 1.79 per cent at Rs 3,748 per share on BSE. In comparison, BSE Sensex was up 0.22 per cent at 81,689.01. The market capitalisation of the company stood at Rs 2,43,894.75 crore. The 52-week high of the stock was at Rs 5,484 per share and 52-week low of the stock stood at Rs 3,567.35 per share.

 

As per reports, Goldman Sachs believes DMart's competitive moat is facing increasing pressure. It further said that the company has increased price discounts to maintain its competitive edge. The brokerage cut its FY25/26/27 earnings estimate by 4.2 per cent/6.2 per cent/6.1 per cent accounting for lower revenue growth. 

Dmart Q2 performance

In the September quarter (Q2FY25), DMart’s net profit increased 5.8 per cent year-on-year (Y-o-Y) to Rs 659.6 crore, compared to Rs 623.6 crore in the same quarter previous fiscal (Q2FY24). The revenue rose 14.4 per cent annually to Rs 14,444.5 crore, up from Rs 12,624.37 crore in Q2FY24.

 

Meanwhile, its earnings before interest, taxes, depreciation, and amortisation (Ebitda) jumped 29.3 per cent to Rs 1,093.8 crore, compared to Rs 846 crore in the previous year. Consequently, Ebitda margin expanded to 7.6 per cent, improving from 6.7 per cent year-on-year.

 

Post the Q2 results, domestic brokerage Motilal Oswal had stressed that DMart's revenue growth is heavily reliant on expanding its store area and they expect store additions to accelerate in the second half of FY25, projecting 40, 45, and 50 new stores for FY25, FY26, and FY27. However, recent like-for-like (LFL) growth has been affected by moderating inflation and the rapid growth of quick commerce services. 

 

The analysts at Motilal lowered their revenue estimates for FY25 and FY26 by 2 per cent and 4 per cent, respectively, as weaker store productivity offsets anticipated higher store additions. Ebitda estimates for FY25 and FY26 have been reduced by 6 per cent and 10 per cent, and EPS estimates by 8 per cent and 14 per cent, respectively. 

 

In the past one year, Avenue Supermarts shares have lost 6 per cent against Sensex's rise of 16.5 per cent.