CLSA has maintained its Outperform rating on Avenue Supermart (DMART) with a target price of ₹5,360, implying a 17% upside from the current market price of ₹4,570. The brokerage noted that DMART’s Q2 sales and profit after tax (PAT) were below expectations. While sales were already disclosed in the company’s sales update, gross margins stood at 14.2%, 30 basis points lower than estimates but up 20 basis points year-on-year.
PAT was significantly below estimates due to higher-than-expected employee costs. CLSA has cut its FY25-FY27 estimates by 13-15% to reflect slower sales and higher overhead costs. Despite increased competition from e-commerce highlighted by DMART’s management, CLSA believes the company’s pivot towards private labels positions it well to face future challenges.
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