Avenue Supermart Ltd. (D-Mart) shares saw a sharp decline of over 8% after the company posted weaker-than-expected results for the second quarter of this financial year. The company reported a 5.8% year-on-year increase in net profit to Rs 659.44 crore, missing analysts’ estimates of Rs 812 crore. This marked a significant shortfall for the parent company of D-Mart.
Revenue for the quarter rose by 14.4% year-on-year to Rs 14,444.50 crore, but again fell short of analysts’ projections of Rs 14,597 crore. The company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased 8.8% year-on-year to Rs 1,093.77 crore, with an EBITDA margin contraction to 7.6% from 8% a year earlier. Analysts had expected an EBITDA of Rs 1,210 crore and a margin of 8.30%.
Following the results, Avenue Supermart’s stock price dropped by 8.06%, trading at ₹4,204.00 on the NSE as of 9:15 am. The company’s total market capitalisation dropped significantly, falling from ₹4,57,270 crore to ₹2,72,390.35 crore, marking a market cap loss of ₹1,84,879.65 crore.
Brokerage Reactions and Downgrades
The weaker Q2 results led to several downgrades from brokerages:
- Morgan Stanley downgraded Avenue Supermart to ‘Underweight’ and reduced the target price to Rs 3,702. The brokerage expressed concerns over the company’s ability to maintain a 20% top-line growth trajectory, suggesting that further de-rating of the stock is possible.
- JPMorgan downgraded the stock to ‘Neutral’ and revised the target price down from Rs 5,400 to Rs 4,700. JPMorgan also lowered its revenue and same-store sales growth (SSSG) forecasts by 4-6% for FY25-26E, and reduced its EBITDA estimates by 8% and 10% for FY25 and FY26, respectively.
The downgrades reflect the growing concerns about D-Mart’s future growth potential, adding pressure to the stock’s performance in the near future.
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